Your Guide to Risk Tolerance

Wizest's Guide to Risk Tolerance

How to Determine the Investment Portfolio That Best Fits You

The first step in any investor’s journey is identifying what your risk tolerance is when it comes to investments and your money. 

Investors are generally grouped into three types of risk categories – high, moderate, or low. These categories help determine how much risk you are prepared to handle. Are you more comfortable growing your portfolio by investing your money in higher-risk investments knowing you can withstand a financial loss should it occur? Or do you value low-risk investments as you navigate a significant change in your life? Maybe you are comfortable with moderate risk tolerance, or so new to investing that you are not sure what your risk tolerance is.

Here are some factors to help you understand what type of investor you are and how to build your asset allocation strategies:

Familiarity with Investing:

Your Knowledge of how the market works is a factor in determining your investment strategy and into which category you should consider placing yourself. Well-versed investors may feel more comfortable making high-risk investments resulting in higher returns. Those with little investment knowledge would fare better approaching the market with a low-risk tolerance. In other words, they rather invest their money in bonds than purchase high-risk stocks.

If you are someone who has shied away from the investment because it is complicated, intimidating, or boring, you are not alone. Only about half of Americans invest in stocks, according to the Federal Reserve System. But starting with a good understanding of investing terminology and trusted guidance can ease those worries.

As it relates to knowledge, your risk tolerance may change over the years, based on where you are in your investment learning journey. While some investors rely on financial advisors who do the work for them, other people gain a better understanding of the system working alongside experts as they learn. 

Understanding Your Timeline

When determining your risk tolerance, one of the main things to consider is your time horizon; meaning how much time you have to not only grow your money in the market but also recover from any declines or losses you may experience when the stock market dips. 

According to the U.S. Securities and Exchange Commission, investors who have long-term financial goals, or those who have more time to invest and possibly recover tend to have a higher risk tolerance, and may benefit financially more from high-risk assets. Those long-term investments can include:


  • Bonds
  • Gold
  • Real Estate

However, investors who are nearing retirement or are not looking to stay in the market for long should value low-risk cash investments such as:

  • Certificates of Deposits (CDs)
  • Money Market Account
  • Treasury Inflation-Protected Securities (TIPS)
  • Corporate Bonds

Purchasing Power

The amount of money investors are willing to invest can influence your financial risk tolerance. Those who have a larger portfolio can take more risks because the overall percentage loss is less. For example, a portfolio with $100,000 in assets may have a different risk tolerance than a portfolio worth only $10,000.

Having a successful investment strategy and portfolio with the highest return potential is ideal, but it may not be the only deciding factor in determining your overall risk tolerance. It’s important to consider all the factors and how they relate to your situation.

Age and Circumstances:

There is no one-size-fits-all strategy when it comes to assessing your risk tolerance level, but there are some factors that may sway you into a certain category, including your age. 

When considering longer-term investments, it is reasonable to assume that younger investors can be viewed as high-risk investors or an aggressive investment strategy, because they have a long time horizon (usually years) to recover from stock market volatility. Those who are in the middle of their careers may have a more conservative risk tolerance, select less-risky investments, and be considered conservative investors or aggressive investors depending on their risk capacity, and how the other risk factors affect them. Those who are approaching retirement or have hit retirement age may have a shorter time horizon, low-risk tolerance, and consider low-risk investments unless they already have a high-performing portfolio giving them higher potential returns.

Aside from age, life circumstances should also be considered. When considering financial goals, factor in the life changes for which you are financially preparing. Those could include:

  • Marriage
  • Divorce
  • Buying a home
  • Having children
  • Education expenses
  • Career Change

Personal Comfort

There are a lot of resources available that offer a risk tolerance quiz or risk tolerance assessments to help you determine your risk profile and how comfortable you are with taking risks. But no one knows you best. Think about the times you’ve passed by a casino and shuttered at the thought of slipping a $20 bill into a slot machine. Or maybe you are the high roller at the craps table who has a good time even if you lost. 

How you value money, the loss of it, and the returns, are key takeaways to consider when assessing your investment risk tolerance. Knowing if you are the type of investor who always plays it safe or someone who takes big risks and can deal with any negative consequences can help you tap into the investment strategy that will work best for you.

Risk Tolerance Can Change Over Time

Assessing your risk tolerance when it comes to your investments is an ongoing mission because, as years go by and life happens your risk tolerance may change. Just as it is important to identify those factors from the beginning, you should regularly assess and re-evaluate to see what may have changed. 

Perhaps you’ve settled into a low-risk category, but you realize that after some time, you’re much more informed about investing, your portfolio is strong, and you are more comfortable with higher-risk assets. Conversely, maybe you find that your high-risk strategy is no longer conducive to your financial goals. 

The beauty of taking control of your financial future is understanding your investment goals, and the opportunity to figure out how the tolerance facstors may work for you or against you at any given time.

Investment doesn’t come without risk, regardless of the level you fall into. However, making investments with your money that align with your risk tolerance, especially with the help of experts and investing models can help you comfortably grow your future wealth.


Five Keys to Planning Your Personal Finances and Making Better Decisions

Wizest - Five Keys to Planning Blog Post Image
Five things to know when making financial decisions

In times of uncertainty such as these, it is essential to make informed and responsible decisions about your finances, which requires setting specific short- and long-term goals, as well as seeking expert advice to guide you along the way. Investing is key to wealth building, however, it is difficult to get started without the support or knowledge of experts along the way. 

Managing money in a level-headed way will never be a simple task, even more so when the immediacy of online platforms leads people to make hasty financial decisions without sufficient guidance.  

Although there is a lot of advice out there, sometimes it is hard to learn through the noise. We gathered five essential keys to planning your finances and making better decisions in 2022 and beyond:

1. Plan: Investing without planning is like traveling without a clear destination

Lack of planning is one of the reasons that lead people to feel anxious and stressed by the management of their money, generating regret for attitudes such as impulsive purchases or lack of savings. 

A report by the U.S. bank holding company Capital One and the research firm The Decision Lab revealed that 77% of Americans surveyed feel anxious about their financial situation.

In fact, 58% acknowledged that finances control their lives, thus generating levels of stress which, in turn, are associated “with worse financial attitudes and practices” such as not saving regularly or simply not planning, according to the report. 

By establishing a plan, and sticking to it, you can feel more in control of your life and future, thus reducing stress.


2. Learn: Make Informed Decisions

Although people now have vast flows of information to analyze available investment options and make better decisions, reliable sources are often ignored and this becomes “a major barrier to financial wellbeing,” according to a report released by The Decision Lab.

In this regard, the Development Bank of Latin America- CAF explains that misinformation on financial matters leads people to limit “their ability to make responsible, conscious and competent decisions.”

To mitigate this situation and contribute to financial education, Wizest created a platform that democratizes access to investments by allowing potential investors to dive into the stock market guided by experts. Investors simply select the expert profile that best aligns with their values and start replicating the movements of their portfolios with a click, which they can monitor on a dashboard.


3 INVEST: Generate More Passive Income

The lack of information about investment opportunities leads people to ignore the option of generating passive income and new sources of wealth, an alternative that despite its characteristics also requires knowledge and responsibility.

Generating this type of income is not as simple as leaving the pilot on autopilot since most people who opt for this alternative have studied it or have the guidance of experts to get into options such as the stock market, government bonds, and other instruments.

The stock market is an option that seduces many investors, but first-time investors are often intimidated by the lack of knowledge of how it truly works. 

In these cases it is essential to have the guidance of experts, who through technological solutions such as Wizest can accompany and guide them on this journey by removing barriers and opening a window of opportunity to generate new income.


4. Diversify: It’s Cliche but True.

Never place all your eggs in one basket! In crisis situations such as the one the world went through due to the coronavirus, the importance of not relying solely on one source of income and not betting all your cards on a single investment proved more true than ever. 

With the ‘boom’ of fintech companies that use technology to generate disruption in the financial sector, it is increasingly simple to access these savings and investment options, allowing potential investors to have greater control over their resources and obtain returns without having to go to traditional banks. 

Accessing the stock market has never been easier thanks to the openness that technological solutions offer, but it is important that each investor evaluates their risk profile and is clear about the extent to which it is convenient to diversify his portfolio. 

Investment management firm BlackRock explains clearly how portfolio diversification is useful at times when an investor is looking to mitigate risk and volatility, enhance returns, as well as “flexibility to achieve a trade-off between liquidity and income-generating assets in the short and long term”


5. PROTECT: Don’t Keep Your Money Static

Keeping money static or investing in alternatives that do not shield investors against inflation, at a time when prices are growing at an accelerating pace in most economies, does not contribute to healthy finances.

Money has to circulate to avoid inflation and devaluation, but every move must be made with conscious planning and taking into account the horizon of each investor. 

Meeting financial goals involves making important decisions such as reducing liabilities (such as debt) and saving with a focus on investment, so it is generally recommended to allocate at least 20% to 40% of your income to investments that will generate passive income, while also creating an emergency fund in case of situations that require this cushion. 

With this in mind, Wizest accompanies investors who have been excluded from the opportunities offered by the stock market, but who have the capital to access this universe, democratizing access and giving potential investors the tools to take control of their finances. 

Wizest: A Quest to Democratize the Stock Market

Wizest - Quest to Democratize the Stock Market - Hero Image

Many Americans do not access investment opportunities in the stock market due to the barriers that the system has imposed in their path, which range from complicated processes, disinformation, or even more simply: they find it intimidating. This situation has, for the first time in decades, pushed the number of investors in the stock market down.

Wizest is removing many of the obstacles investors face.

Prior to the global financial crisis at the turn of the century, the number of U.S. adults investing in the stock market peaked at 65 percent in 2007the highest level since at least 1999. Since then, that number has been consistently falling.

In fact, over the past twelve years, the number of U.S. adults investing in the stock market has remained virtually static. And although it has not fallen below 50%, it does not show signs of regaining its growth despite all the opportunities that technology has opened for more people to access.

According to figures released by Gallup, in 2022 58% of Americans held some type of shares, a figure higher than in 2021 (56%) and 2020 (55%). However, this is highly correlated to factors such as household income and education. The report shows that 89% of U.S. adults from households with incomes above the US $100,000 own shares, as do 79% of those with higher education.

A Simple Education Problem

In general terms, there is still ignorance about how the markets operate since a survey by the financial services company Bankrate reveals that 56% of those consulted considered that “the stock market is manipulated against individual investors“.

“Nearly half of Americans and most individual investors have doubts about the integrity of financial markets, but the results show that disciplined, diversified, and low-cost investing is rewarded over time,” said Greg McBride, Chief Financial Analyst at Bankrate.


Bankrate - Top 5 Reasons Americans aren't invested in stocks - infographic

In fact, Bankrate found that 32% of those who do not invest in the market do not do so simply because they do not understand how it works, while for 13% it is more comfortable to focus on what they consider safer investments, among which they cite bonds or savings accounts (Bankrate Graph).

In the midst of this scenario, options such as those offered by the fintech Wizest are opening up, which allow small investors in the U.S. to immerse in the world of finance, empowering them and giving them the tools they need to navigate it.

The platform was born with the premise of democratizing access to the stock market so that more people can invest the same way the high-earning and highly educated minority does.

The purpose of this fintech is to make investments a pleasant human experience for everyone, helping its users to strengthen their financial education and eliminating the obstacles that kept them away from the markets.

Listed as “much more authentic than Robinhood will ever be” by some specialized publications, this fintech offers its users the possibility of replicating the portfolios of financial experts allowing them to select those that most align with their principles.

Wizest goes a step further and presents a differential from traditional alternatives since these focus on two paths: either they let users invest and take risks on their own, or at the other end, they take them away from the decision-making equation.

“While most platforms are completely passive, don’t provide autonomy, or force you to get financial guidance from dubious sources, Wizest allows you to select from a wealth of analysis and expert advice to create a meaningful personal portfolio,” the company explains.

Once users choose the experts to follow, they can begin to make their first moves in sectors as varied as renewable energy to technology companies, as they gain experience through this type of operation.

The experts who participate in this platform earn in many ways and at no cost, creating a domestic customer base and additional revenue.

Among the main sales offered by this fintech to its users stands out, among others, the possibility of accessing a free simulator, while in other types of services a Premium subscription can cost investors $ 20 per month from the first moment and without the possibility of trying.

With this innovation, Wizest seeks to be recognized as the “Uber of investment.” It is building bridges between experts and potential investors who, despite having the capital, remain unattended in the midst of a wide range of opportunities. This platform untapped these opportunities, democratizing access to strategies through a community approach and with the guidance from the experts. Starting to invest in the stock market is just a click away.

What is a SPAC?!

A Special Purpose Acquisition Company (SPAC) is a company set up by investors (SPAC sponsors) with the sole purpose of raising money through an initial public offering (IPO) to acquire another company. In short, a SPAC has the “special purpose” of solely raising money to “acquire” another company, but does not make any products or sell anything itself.

Rather than go through the very long traditional IPO process with the SEC (up to half a year), a SPAC offers an alternative of going “public” within months by offering low price shares. These shares are offered to other investors to raise the capital necessary to acquire a private company to merge with the SPAC. Sponsors are betting on this acquisition to increase the value of shares for the newly combined entity–thus making a profit for investors and sponsors alike.

In return, investors in SPAC’s have the ability to earn interest on their money through what is called a “trust account” which is held by the SPAC. Their dollars will accrue to acquire a target private company within the span of two years. When the target private company is finally acquired by the SPAC, investors may choose to sell their shares in return for the interest earned in the trust account, plus their original investment. Or, investors can continue to hold their shares of the newly combined entity at their new market value. However, if a company is not acquired within the specified time frame, the SPAC itself is liquidated, and investors have their money returned along with the interest earned from the trust account.

Key Considerations:

  • Who are the SPAC Sponsors? Management expertise is critical.
  • What is the target company selected for acquisition? The target company is often unknown until selection and/or after an initial “IPO” investment.
  • What is your appetite for risk as an investor? SPAC’s tend to be higher risk investments for all the reasons mentioned above. 

An Introduction to Investing Terminology

Wizest was built to empower anyone to invest like a financial expert–through financial experts! Nevertheless, many of our users want to learn about the world of finance for themselves. Therefore, we’ve compiled this cheat sheet of finance and investing terminology. You may see them appear in the posts and bios of our Wizest experts. (When you’re ready, check out these books and podcasts to learn more!) 

Stock – An ownership piece of a company that can be bought and sold. 

Bond – A piece of debt, usually of a company or country, that can be bought, sold, or held until a certain point in time (i.e. the maturity date).

Security – The group term to refer to both stocks and bonds (and sometimes other less common financial goods too). 

Earnings report – Regular updates released by companies that include information like income and sales.

Dividend – A payment made to people who own the stock of a company, typically each quarter. The amount varies by company and stock type.

Mutual fund – Groups of people pooling their money together for experts to buy stocks and other securities. Can be bought similarly to a stock, but sometimes at a particular minimum or particular time.

Index or stock market index – A collection of important stocks that represent something about the overall stock market.

ETF or exchange-traded fund – Similar to a mutual fund, but instead these are bought and sold just as easily as stocks.

Hedge fund – Similar to a mutual fund, but typically buying more complex financial goods and using more complicated investing strategies.

Financial advisor – A trained professional that has passed exams from the Financial Industry Regulatory Authority (FINRA) allowing them to provide financial advice.

Financial analyst – Someone who examines financial data to find good deals for buying and selling.

Financial planner – Similar to a financial advisor, but focusing more broadly on personal financial goals, not just investments.

Commodity – Large quantities of goods that can be bought and sold, like sugar, oil, and gold. 

AUM or assets under management – The total amount of money that investors have given to a financial expert or fund.

Money market fund – Similar to a mutual fund, but focusing on extremely low-risk financial goods, like very stable government bonds. 

Short-term capital gains – Profit made from the buying and selling of something in less than one year. Importantly, these are taxed just like regular income.

Long-term capital gains – Profit made from the buying and selling of something across more than one year. These are typically taxed less than regular income or short-term capital gains.

Our Favorite Podcasts for Learning Finance​

Swamped by the ever-growing list of new podcasts? How do you know what you’ll get searching “money,” “finance,” or, “investing,” on Spotify? Wizest has surveyed the landscape on your behalf, choosing our six favorite podcasts, each with a particular goal that our investors tend to have in mind.
Best for Daily News: Wall Street Journal’s What’s News
Quick and high-level, WSJ is currently outperforming all the rest with these reliable episodes averaging just fifteen minutes. Great for commuting with both morning and evening editions.
Best for Personal Finance: So Money
Don’t want to read the same personal finance gurus as mom and dad? Look no further. Farnoosh Torabi is bringing a much needed, diverse, and female-led facelift to a space long dominated by figures like Dave Ramsey. Practical financial advice on buying a house, buying versus leasing a new car, and special interviews dedicated to women’s and minority issues.
Best for Young Professionals: Millennial Investing – The Investor’s Podcast Network
Deep dive episodes into all the new ideas which differentiate the next generation of investing from the last one. Expert interviews on topics like cryptocurrency, investing psychology, student loans, and much more.
Best for Fintech and Startups: Breaking Banks with Brett King
More than ever, technology is mediating the way that we interact with our finances. New banking, trading, and finance apps are emerging daily. (Wizest included!) This podcast will keep you primed on everything tech and trending.
Best for Growing Expertise: We Study Billionaires – The Investor’s Podcast Network
This outlet landed on our list for a second time with a shockingly entertaining show that began like a book club: the two co-hosts reading about some of the most successful investors and entrepreneurs of all-time, then summarizing the lessons learned. Today, We Study Billionaires regularly features some of the titans that their hosts initially profiled.
Best for In-Depth Analysis: Bloomberg Masters in Business
Know your way around plenty of financial jargon? (If not, check out our primer.) Bloomberg Masters in Business offers competing perspectives on investing, often with timely analysis, from the movers and shakers behind today’s markets. If you’re advancing as a student of finance or are already an expert with Wizest, this show shares focused commentary from your peers.

A List of Great Investing Books, Organized by Skill Level (Part 1–Learn)​

 Never liked the look of finance textbooks or the business section at Barnes and Noble? Picking the right reads for your investing journey can be intimidating just like picking stocks and bonds. Here Wizest has compiled a list of all-time favorites among investing professionals, organized by skill level. (If podcasts are more your thing, no worries! We’ve got you covered.)

The Little Book that Beats the Market by Joel Greenblatt

Here in a brief and approachable book, the legendary founder of hedge fund Gotham Capital, Joel Greenblatt, explains a philosophy for just about anyone to earn superior investment returns. Greenblatt has a gift for simplifying and teaching real finance using everyday examples that anyone can grasp. The book begins with a story about selling chewing gum in elementary school and ends with a disciplined formula for selecting, buying, and selling a stock portfolio.

The Education of a Value Investor by Guy Spier

Part biography, part self-help book, and part investment strategy, follow the author, Guy Spier, as he achieves financial enlightenment. After a privileged education, including a degree from Oxford, Spier begins his career like many other sharks on Wall Street. Then, a chance encounter with “value investing” teaches Spier to focus on the big picture, to avoid chasing overnight returns, and to balance his portfolio with a better quality of life–earning better returns in the process. 

More Money than God by Sebastian Mallaby

For those who are interested in the Wild West of high finance, Mallaby has crafted a masterful history of the hedge fund industry. If you never thought that you could be intrigued by complex financial instruments, let Mallaby put your assumptions to the test. The author explains how the creativity, ambition, and greed of a handful of enterprising individuals has shaped modern economic history. From speculating on cocoa and frozen orange juice, to clandestine meetings with government officials in developing countries, Mallaby explains the colorful reality behind high-stakes investing.

Enjoy this list? Come back for Part 2–Advance! We’ll be posting soon.