Sharon Appelman: "We go back to the basics of risk tolerance"

Q: What did you learn from the financial crisis that informs how you advise clients today?

A: This year, there’s an uptick in clients talking about … increasing their equity holdings. We go back to the basics of risk tolerance. We don’t just talk about returns; we talk about risk-adjusted returns. We look at the downside risk of the portfolio and the upside potential. Most of the time, a change isn’t warranted. A lot of times, the conversation is reminding them how the portfolio is positioned and why it’s that way. Nine times out of 10, that is all they need to hear. If you have done a good job structuring the portfolios, it really is important to stay the course. I don’t mean buy-and-hold forever, but when you follow your discipline, you can overcome emotions. That’s where advisers really add a lot of value. Everything I just told you is as relevant today as it was in 2008. What’s different is that in 2008, the primary concern was losses, where now the concern is missing out on gains.

Sharon Appelman

New York

— as told to Mark Schoeff Jr.