Is It Time to Reassess My Risk Tolerance? (I’m in My 40s)

Danielle has a question regarding her aggressive financial personality. Danielle says that she maxes out her 401(k) and has to do backdoor Roth contributions, which lets us know that she’s a high-income individual and a good saver. However, the question remains, is it okay for her to be 100% aggressive in stocks at this stage in her journey?

The first thing to consider is why Danielle wants to be so aggressive. Even if Danielle has a high risk tolerance, it doesn’t mean she should take that risk, especially since she’s in her 40s and approaching the prime time for wealth building. It’s no longer about how much money she’s making but how much of it she gets to keep over the long term and how much she’s actually moving towards her financial goals.

There are three things I think you should consider. The first is to consider who’s counting on her. If she has a spouse and kids, it’s a different situation than if she’s single and has nobody counting on her for the money. The second is to know herself. If she’s the type of person who is happy as long as she’s healthy and could lose it all tomorrow and walk away, it’s a different scenario than someone who needs some basics and an emergency reserve. The third thing is to consider what it’s all for, the why behind her aggressive financial personality. If she’s 42 and 100% growth with equities only, I would ask if she’s ahead of the game or still playing catch-up.

In conclusion, while Danielle may have the risk tolerance for an aggressive financial personality, it’s important to consider who’s counting on her, to know herself, and to understand the why behind her financial choices.