Their tolerance for risk is average. Their liquidity needs are high because of their living expenses and other needs yet they have a large portfolio so overall their risk tolerance is average. Since they are in their retirement years, they will be living off their portfolio and not adding to it other than the growth in the portfolio to meet their living expenses and stay even with inflation. Always view the portfolio from a total return basis in which the amount used for living expenses is taken from a combination of income and capital gains generated from the portfolio. A general rule is that there should always be some cash component in the portfolio but not too much, usually around ±5% or 3 to 6 months worth of living expenses |
