Money Rehab with Nicole Lapin - How Spicy is Your Investment Strategy

Episode Date: June 2, 2021

How risk-tolerant are you? From 401k’s to the stock market, take our handy quiz and follow your gut when it comes to investments. Your instincts can help get you where you want to be, financially, in the long run. Learn more about your ad-choices at https://www.iheartpodcastnetwork.comSee omnystudio.com/listener for privacy information.

Money rehabbers, you get it. When you're trying to have it all, you end up doing a lot of juggling. You have to balance your work, your friends, and everything in between. So when it comes to your finances, the last thing you need is more juggling. That's where Bank of America steps in. With Bank of America, you can manage your banking, borrowing, and even investing all in one place. Their digital tools bring everything together under one roof, giving you a clear view of your finances whenever you need it. Plus, with Bank of America's wealth of expert guidance available at any time, you can feel confident that your

money is working as hard as you do. So why overcomplicate your money? Keep it simple with Bank of America, your one-stop shop for everything you need today and the goals you're working toward tomorrow. To get started, visit bofa.com slash newprosmedia. That's b-o-f-a dot com slash n-e-w pros p-r-o-s media. bfa.com slash newprosmedia. Hey guys, are you ready for some money rehab? Wall Street has been completely upended by an unlikely player, GameStop. And should I have a 401k? You don't do it? No, I never do it. You think the whole world revolves around you and your money.

Well, it doesn't. Charge for wasting our time. I will take a check. Like an old school check. You recognize her from anchoring on CNN, CNBC, and Bloomberg. The only financial expert you don't need a dictionary to understand. Nicole Lappin. Since I posted my listener intervention with Angelica on saving for retirement,

I've been getting so many DMs from listeners saying that they've signed up for retirement accounts. Yay! It makes my heart so, so, so happy. I've gotten a couple of messages from people asking about the risk assessment questions that also come up when you're signing up for a retirement account. So here's one from money rehabber Abby. Hi, Nicole. I went to sign up for my company's 401k online. And just as I was clicking through, there were questions about my risk tolerance that I had to answer. And I was wondering how I figure out what my risk tolerance is. And also, I guess I'm not totally sure what risk tolerance even means.

So if you could walk me through that, that would be great. Thanks. So, Abby, your 401k is a retirement account that's connected to the stock market. In other words, the money you contribute to your 401k will be invested in the market, and the actual process of making the investments will likely be done for you. For example, iHeartMedia's 401k employee program is with the company Fidelity. 401k employee program is with the company Fidelity. One of our lovely and talented producers, Morgan, signed up with the company's 401k plan and the money she contributes monthly is taken out of her paycheck pre-tax. It goes right to Fidelity. And then Fidelity makes investments on Morgan's

behalf. Most 401k accounts are like this, where you can set it and forget it, as we say in the biz, so you're not actively making the investments yourself. The goal of the stock market is to put money into companies you think will grow, right? But you never know when a stock will boom or when it will be a bust. And a lot of stocks live in these two extremes. Some of the riskiest investments offer some of the biggest payout, though. But the flip side is you could lose it all. Your risk tolerance is the extent at which you're willing to risk a bust for a boom. And typically, the risk that you're able to stomach in your everyday life does translate into the heat you can handle in the investment world.

So to help you figure out what your risk tolerance is, I've put together a little two-part multiple choice quiz for you. You ready? The first part gets at the question of how much heat you can handle. So let's get to it. Number one, your friends would typically describe you as A, the designated driver, B, the life of the party, or C, the thrill-seeking party animal. Number two, you win a hundred bucks at a friendly game of poker and you A, put it into your savings account, B, use the money to go out for the rest of the night, C, insist on playing another game so you can try and double your money. Number three, your dream vacation would be A, having a nice, well-planned staycation, B, saving up to go somewhere you've

always wanted to visit, or C, splurging on a far-off adventure or the buzziest exotic hot spot. Fyre Festival, anyone? Number four, the most important position on the field is A, defense, B, the coach, or C, the offense. And number five, the thought of investing in the stock market makes you feel A, sick to your stomach. Obviously, you're going to lose everything. B, intrigued and excited to learn more. Or C, awesome, you're going to make a killing. Duh. If you answered all or mostly A's, you're not the

riskiest bitch of the bunch. I'm just going to keep it real. You're likely to be a more conservative investor and your priority is minimizing your chances of losing money, even if that means you'll likely make less money in the market. If you answered all or mostly Bs, you'll likely be in the middle of the road. You're an investor with a healthy attitude to assess risk and reward objectively. If you answered all or mostly Cs, you're likely a pretty aggressive investor seeking the highest possible reward without flinching at the possibility of losing money. Now, you might not consider yourself a thrillist, but should you act that way in the market? Well, maybe and maybe not. That depends mostly on your age, but also when you will need the money, how much money you can

afford to lose, and what you want to get with the money you invest. For some basic guidelines for the level of risk you should take on, here's part two of the quiz. Number one, how old are you? A, 45 or over. B, 35 to 44. Or C, 18 to 34. Number two, what is the next big purchase you're focused on? A, living a sweet retirement.

B, my kid's college education. Or C, nothing on the horizon, but a second house or car would be nice. Number three, when is your next big purchase? A, five years or so, B, 10 to 15 years, or C, 15 or more years. Number four, I expect my income to A, decline in the next few years. Unfortunately, my job is on shaky ground. B, stay the same.

I'm tenured or have no worries that my salary will change significantly in the next few years. Or C, increase. I'm actually getting a raise or jumping to another job with a higher salary. So for this one, if you answered all or mostly A's, you should be a more conservative investor because you're likely older or you have more of an urgent need for the money or have some uncertainties in your future income. If you answered all or mostly B's, you should be a more moderate investor because you don't necessarily need the money too soon, but you also have a steady stream of income. If you answered all or mostly Cs, you should likely be a more aggressive investor

because you have a long-term horizon for your investments or maybe even you're flush with cash. And to get back to the title of this episode, if you found yourself mostly in the A category for both quizzes, then you would be like a self-subverting. If you found yourself mostly in the A category for both quizzes, then you would be like a salsa verde. If you answered mostly Cs on both, then you're like a habanero. You're super aggressive and super, super, super spicy. But if you're kind of all over the place, if you answered Bs on both or As on the first and Cs on the second, then you're like a Tabasco. And now you know. Here's today's tip you can take straight to the bank. As we well know, the stock market is risky.

If you're investing in the market, there will be periods where you lose money. Sugarcoating that fact would just be lying to you. And I'm not doing that. But whether that fact sits well with you or not, or on the flip side, whether your stomach just did backflips at the mere thought of losing

money, that's your risk tolerance. And knowing that about yourself will put you on track to the investment strategy that works best for you. And only you. Money Rehab is a production of iHeartMedia. I'm your host, Nicole Lappin. Our producers are Morgan Lavoie and Catherine Law. Money Rehab is edited and engineered by Brandon Dickert with help from Josh Fisher. Executive producers are Mangesh Hatikader and Will Pearson. Huge thanks to the OG Money Rehab supervising producer, Michelle Lanz, for her pre-production and development work. And as always, thanks to you for finally investing in yourself so that

you can get it together and get it all.