When investors talk about performance, the focus often jumps straight to returns. But the decision that most determines long-term success happens before markets move—your asset allocation.
Your allocation—the balance between equities, bonds, cash, and other investments—defines how much risk you take, how much volatility you’ll experience, and how confident you can be in meeting your goals. The right question isn’t “How much can I make?” It’s “How much risk should I take to reach my goals without losing sleep or derailing my plan?”
Understanding Risk Beyond Volatility
When people hear “risk,” they often think of market swings. But true investment risk is multi-dimensional—especially for those approaching or in retirement. It includes:
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Drawdown & shortfall risk: The chance your portfolio drops enough to jeopardize your goals.
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Sequence-of-returns risk: Poor returns near retirement can have a lasting impact, even if long-term averages look fine.
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Inflation risk: Rising costs erode purchasing power over time.
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Longevity risk: Living longer means your money must last longer.
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Interest-rate & credit risk: Bond prices move with rates; lower-quality bonds can default.
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Liquidity risk: Needing to access funds when markets are down.
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Concentration risk: Too much invested in one company, sector, or country.
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Behavioral risk: The tendency to sell low, buy high, or abandon the plan during market stress.
Managing risk means balancing all of these factors, not just reacting to volatility.
The Risk Profile Triad: Tolerance, Capacity, and Need
A sound retirement income plan integrates three kinds of risk awareness:
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Risk tolerance — Your emotional comfort with market fluctuations and loss.
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Risk capacity — Your financial ability to absorb losses without compromising goals.
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Need to take risk — The return your plan requires to stay on track.
Your best allocation lies where these three overlap—balancing your psychology, finances, and objectives.
Translating Your Profile into a Working Allocation
Each piece of your portfolio serves a distinct purpose:
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Equities for growth: U.S. and international exposure drive long-term appreciation.
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Bonds for stability: High-quality, duration-aware fixed income smooths volatility and supports withdrawals.
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Cash for flexibility: Maintaining 6–24 months of expenses provides a spending buffer.
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Diversifiers as needed: Certain alternatives or structured products can help manage volatility, but should serve strategy—not complexity.
Learn how diversification across these areas strengthens portfolio resilience.
Why Sequence Risk Deserves Attention
For retirees, the five years around retirement can make or break a plan. Market declines during early withdrawals can permanently shrink your portfolio.
Mitigate this by building a cash and bond “runway” for short-term needs, adjusting withdrawals during down markets, and keeping equity exposure aligned with your actual capacity—not your mood.
Our team at Genesis Wealth Management Group helps pre-retirees and retirees navigate these trade-offs through disciplined retirement income strategies and portfolio design.
A Process That Replaces Guesswork with Clarity
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Discovery: Define goals, spending priorities, and constraints.
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Measure the triad: Assess your tolerance, capacity, and need through conversations and financial analysis.
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Model outcomes: Stress-test different allocations across market cycles and inflation paths.
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Set rules: Create rebalancing bands and withdrawal guardrails.
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Coordinate taxes: Align investments with tax-smart placement, Roth conversions, and RMD strategies.
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Review regularly: Update your plan as life events, markets, or legislation evolve.
Test Your Risk Alignment
A quick way to gauge whether your portfolio fits your comfort and capacity is through a short Risk Tolerance Assessment. Understanding your behavioral tendencies helps ensure your portfolio is built for both your goals and peace of mind.
The Bottom Line
The right allocation isn’t about chasing maximum returns. It’s about finding the mix that supports your lifestyle, your goals, and your ability to stay invested through market ups and downs.
A thoughtful allocation is the foundation of financial confidence—it keeps your plan intact and your future on course.
About Genesis Wealth Management Group
Bill Kinkel and his CFP® team work with clients—especially those 50+—to align investments with long-term goals through disciplined, transparent planning.
If you’d like a second opinion on your current portfolio or a stress test of your plan, schedule a 30-minute conversation.
Website: billkinkel.com
Phone: (618) 368-6800
Email: bill@genesisfg.com
Disclosure
All content is for information purposes only. The information contained in this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy or completeness and does not purport to be a complete analysis of the materials discussed. Opinions expressed herein are solely those of Genesis Wealth Management Group, LLC and our editorial staff. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Investment advisory services offered through Genesis Wealth Management Group, LLC.
