Measuring Risk

As the bears hold sway on Wall Street, it may seem like locking the barn door after the horse is gone, but it helps to know just how risky your portfolio is. A good way to find out is through RiskGrades, where you'll find a wide array of tools to help you gauge risk.

As the bears hold sway on Wall Street, it may seem like locking the barn door after the horse is gone, but it helps to know just how risky your portfolio is. A good way to find out is through RiskGrades, where you’ll find a wide array of tools to help you gauge risk.

You can enter your entire portfolio or zero in on individual holdings and you’ll get an analysis of how much risk you’re taking on. Each holding is given a risk grade, ranging from 0 for cash to well over 1,000 for extremely speculative investments. A grade of 100 is equal to the average risk of all the financial assets in the world. A rating below 100 indicates less risk; above 100 means more. A risk grade of 200 means your portfolio is twice as risky as the global average. Currently, the risk grade for the Dow Jones Industrial Average is 90, for the S&P 500, it’s 93, and for the NASDAQ Composite, it’s 113.

There are other useful tools. The site also calculates yield per unit of risk, so you can see if your returns justify the risk involved. And if you’re buying a stock or mutual fund, you can search the site for investments within a specific range of risk grades, based on your risk tolerance. And there’s even a questionnaire to help you measure your risk tolerance. Note: You must register to use the site, but the information is free.