By Tyler C. Gilley, CFP®, AIF®, Associate Wealth Advisor at Halbert Hargrove

“No risk, no reward!” Most people are familiar with this expression. But familiarity can be far from fully understanding all the implications. I wanted to offer a few thoughts on the topic of risk tolerance right now because we are seeing economic and market conditions which are challenging even the most experienced investors to consider their relationship with risk and returns. I hope this can be useful as you evaluate your own strategy and consider the level of risk appropriate for you and your financial goals.

In my experience, relatively few people truly appreciate the tradeoffs that exist between investment risk and return. When the market is chugging along consistently, rising month after month, year after year, it might be easy for some to believe they have a high tolerance for risk. But the very definition of risk implies that it won’t always be smooth sailing.

In fact, those who start investing during periods of steady growth may discover that they actually only have a high tolerance for positive returns. Then, when the stock market drops and the news starts filling up with unsettling headlines, that appetite for risk can fade rather quickly.

Figuring out what risk you can truly tolerate

Sometimes it takes a few tries – or a few market cycles – to figure out what your risk tolerance really is.

This is not an encouragement to jump ship from current markets. The main thing to remember is that the market’s performance last year (or even last week) shouldn’t be the determining factor in how we invest for the future. We were reminded of this truth in 2020 when, after falling 34% in less than two months, the S&P 500 went on to experience incredible growth, closing out the calendar year with a +16% return (source: YCharts).

I am also not saying that investors should never make changes to their portfolio. There are  many reasons why it would be smart to change an allocation or swap out an investment. One example: An investor who is within a few years of retirement may benefit from taking some chips off the table and experiencing less drastic swings in their portfolio value — especially if they are going to rely on regular distributions to cover living expenses. Or one’s life circumstances could take a sudden swerve.

Understanding your true risk tolerance can be a useful tool in setting your expectations about investment outcomes, but quantifying it can be tricky. And, if you’re anything like me, you might have trouble filling out a risk profile because every question might seem to have a “right” and “wrong” answer. In other words, you might know what you ought to do in a given situation, but it can be difficult to gauge the emotional impact of those decisions during stressful, unforeseen circumstances. Alternatively, you may second guess your answers and start overthinking the available options.

Fortunately, at Halbert Hargrove our recommendation for an appropriate portfolio strategy is based on learning as much as we can about you – not on some quick survey that might tap into your perceived risk tolerance. We believe taking the LifePhase investing approach is essential to gain a deeper understanding – to learn about the things that keep you up at night, what inspires you to dream about the future, your hobbies and travel plans, your goals to help support your children.

All of these factors play a role in how we think about making investments on your behalf. We appreciate opportunities to speak with you about what matters to you. And that most certainly includes exploring how to help you determine, and keep calibrating, your own tolerance – or intolerance – for risk.


Halbert Hargrove Global Advisors, LLC (“HH”) is an SEC registered investment adviser located in Long Beach, California. Registration does not imply a certain level of skill or training. Additional information about HH, including our registration status, fees, and services can be found at This blog is provided for informational purposes only and should not be construed as personalized investment advice. It should not be construed as a solicitation to offer personal securities transactions or provide personalized investment advice. The information provided does not constitute any legal, tax or accounting advice. We recommend that you seek the advice of a qualified attorney and accountant.

The views contained herein are not to be taken as advice or a recommendation to buy or sell any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without previous notice. There is no guarantee any forward-looking statement will come to pass. All opinions or views reflect the judgment of the author as of the publication date and are subject to change without notice. All information presented herein is considered to be accurate at the time of writing, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. This material should not be relied upon by you in evaluating the merits of investing in any securities or products mentioned herein. In addition, the Investor should make an independent assessment of the legal, regulatory, tax, credit, and accounting and determine, together with their own professional advisers if any of the investments mentioned herein are suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yield may not be a reliable guide to future performance. Any reference to a market index is included for illustrative purposes only as it is not possible to directly invest in an index.