15% Apple Stock for 81-Year-Old Widow???
I have to share this shocking story with you about a meeting I had with an 81-year-old widow and the portfolio she had at a wirehouse, which I will not mention. She had just under $1 million in assets needed to tap into her portfolio for income. Her largest holding was Apple stock at 16% and it’s hard to believe, but Facebook was 8% of the portfolio, along with other stocks and costly mutual funds. Finally, she had 80% in equities!
After digging into the entire portfolio, determining the risk in each investment, then the entire portfolio as a whole, I was able to give her a Risk Point Analysis. I showed her how when the S&P 500 Index goes down, her portfolio falls even more. I showed her how much her portfolio would fall if stocks dropped 40%. She just didn’t realize how many stocks she had in the portfolio and the other advisor didn’t explain that to her by putting her assets in another “platform based portfolio”. Needless to say she was shocked and it was more than an eye-opening experience for her. Beyond just the Risk Point Analysis, I asked questions like “How much do you want to spend on a monthly basis? What income sources do you have like Social Security or a Pension? And what do you want to leave to your family?”
As you can imagine I spent a great deal of time with this woman, including other family members, to discuss other factors like tax information, income needs, estate planning desires and a quantifiable risk tolerance.
Knowing how much risk a client can handle is a fundamental building block for any portfolio. Along with Asset Allocation, actually knowing your risk tolerance and the risk with your current portfolio allows for an honest conversation and sets up better expectations for a long-term portfolio and relationship with your advisor.
Until Next Time,
Scott Krase, Wealth Manager
info@commonfinancialsense.com
#financialadvisor
