Recently, my wife and I returned from a vacation to Maui. Each day we sat on the beach, listened to our iPods and watched the waves roll in over and over again. We saw children playing in the sand, people strolling along the beach, sunbathers soaking in the sun and palm trees blowing in the breeze. It was relaxation at its best.

This stress-free picture describes what an ideal investment program would be like — a low-stress, methodical strategy that allows you to reach your long-term goals.

Is it possible to have this type of experience?

Over the past 10 years, many investors’ experiences have been more like riding a roller coaster in the dark with no brakes, which is the complete opposite of low stress.

While it is impossible to have a completely stress-free experience, it is possible to reduce stress significantly by building a portfolio that is aligned with your specific risk tolerance. Your risk tolerance determines how aggressive or conservative you are invested. Your particular mix might be 20 percent conservative and 80 percent growth, 50/50, 70/30 or some other combination. It is different for each person. It depends on your individual goals and objectives and what you can handle.

Every investor has an amount of risk he or she is comfortable with. If your risk level is set too high, you will most likely have a hard time every time your account value declines. If your risk level is set too low, your returns may be inadequate, and you will never reach your goals. Basically, when it is not set right, you will worry every time the market drops and become euphoric every time it goes up.

Why is this so important? Because many investors do not consider how much risk they are signing up for when they initially invest. It might be invested in a way that you will lose everything when something goes wrong. For long-term success, it is critical you have a clear idea of exactly how much risk you are exposed to. Otherwise, your chances of success are slim.

Paragon cannot guarantee the accuracy of information from other sources. Opinions are as of the dates indicated only. This report is not a solicitation for any security. Past performance is not a guarantee of future results. Investment performance reflects time and size-weighted geometric composite returns of actual client accounts. Investment returns are net of all fees and costs. The S&P Index is a diversified, size weighted index of 500 stocks.

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