Wed07302014

News

"Brown is the new green," says local water district


Lina Broydo/Special to the Town Crier
Are downtown Los Altos flower pots getting too much water? The Santa Clara Valley Water District plans to hire “water cops” to discourage overwatering.

The Santa Clara Valley Water District is spending nearl...

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Schools

Foothill camps prepare local students for STEM careers

Foothill camps prepare local students for STEM careers


Photos Ellie Van Houtte/Town Crier
Middle school students make robotic hands using 3-D printers during a STEM Summer Camp at Foothill College.

From designing roller coasters to developing biodegradable plastics, high school students received an i...

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Community

Local entrepreneur opens home to Afghan and Rwandan women

Local entrepreneur opens home to Afghan and Rwandan women


Ellie Van Houtte/Town Crier
Businesswomen Joan Mazimhaka of Rwanda, third from left, and Fakhria Ibrahimi of Afghanistan, in orange, traveled to the U.S. with a 26-woman delegation through the Peace Through Business program.

Employees scoop ice ...

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Comment

Moving on: The Rockey Road

Just over a month ago, we decided to put our house on the market. My husband and I had been tossing around the idea of moving back to the area where we grew up, which is only approximately 40 minutes from here. Of course, Los Altos is a great place t...

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Business

Halo heads to Los Altos: Blow-dry bar founder opens new First Street location Monday

Halo heads to Los Altos: Blow-dry bar founder opens new First Street location Monday


ElLie Van Houtte/ Town Crier
Armed with blow dryers, Halo founder Rosemary Camposano, left, and store manager Nikki Thomas prepare for the blow-dry bar’s grand opening on First Street Monday.

A blow-dry bar is set to open downtown Monday, and i...

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Books

"Frozen in Time" chronicles harrowing WWII rescue attempts


Many readers can’t resist a true-life adventure story, especially those that shine a spotlight on people who exhibit supreme courage in the face of adversity and end up surviving – or not – against the odds.

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People

DR. ALFRED HUGHES

Long time Los Altos resident, Dr. Alfred Hughes, died May 1st after a long illness. Dr. Hughes was born in 1927 in Maspeth, NY. He served in the US Army from 1945-6, attended Brooklyn Polytechnic University, then graduated from Reed College in Portla...

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Travel

Travel Tidbit: Ritz-Carlton, Lake Tahoe offers spa getaway

Travel Tidbit: Ritz-Carlton, Lake Tahoe offers spa getaway


Courtesy of Ritz-Carlton
The Ritz-Carlton in Lake Tahoe offers fall getaway packages that include spa treatments and yoga classes.

Fall in North Lake Tahoe boasts crisp mornings and opportunities to spend quality time in the mountains. Specially ...

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Stepping Out

'Wizard' winds down at Bus Barn

'Wizard' winds down at Bus Barn


Town Crier file photo
Local actors rehearse a scene from “The Wizard of Oz.”

Los Altos Youth Theatre and Los Altos Stage Company’s collaborative production of “The Wizard of Oz” is slated to close Sunday at Bus Barn Theater, 97 Hillview Ave.

T...

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Spiritual Life

Stanford University appoints new dean for religious life

Stanford University appoints new dean for religious life


Shaw

Stanford University named the Very Rev. Dr. Jane Shaw, dean of Grace Cathedral in San Francisco, its new dean for religious life.

Provost John Etchemendy announced Shaw’s appointment July 21, adding that she also will join the faculty in...

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Magazine

Festival features fun for everyone

Festival features fun for everyone


TOWN CRIER FILE PHOTO
The Los Altos Arts & Wine Festival boasts more than 375 craft and arts booths.

This weekend’s 35th annual Los Altos Arts & Wine Festival promises to be jam-packed with fun activities for just about everyone. The eve...

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Discovering your risk tolerance

If you have an investment account at a brokerage firm, chances are you’ve encountered a risk tolerance questionnaire.

Such a document purports to determine how comfortable you are with investment risk. Questions range from the simple, “Are you investing primarily for income or for growth?” to the sublime, “If you are offered $100 or the chance to win either $0 or $300, which would you choose?” The firms use the questionnaires to help salespeople sell you suitable investments, but they also serve as protection should the firm be audited by its regulator.

The problem? These questionnaires pretty much tell us nothing about your true risk tolerance.

Daniel Kahneman and Amos Tversky were among the pioneers of what is currently called “behavioral finance,” which attempts to understand the psychology behind the behavior of investors and ultimately how it affects the capital markets. One of their most fundamental findings – for which Kahneman won the Nobel Prize in Economics in 2002 – was that people’s attitudes toward risks concerning gains might be quite different from their attitudes toward risks concerning losses.

For example, in answer to the gambling question above, risk-averse people will typically choose the $100. However, when confronted with the inverse choice of losing $100 or the chance to lose $0 or $300, the same people will commonly select the risky option ($0 or -$300).

The prevailing economic environment also often influences this asymmetrical attitude toward risk. In early 2009, one of my clients had become so risk-averse that she was ready to sell all her investments. Of course I spent time with her explaining the value of sticking to her financial plan and investment strategy. By 2010 – after her portfolio had rebounded not only from market action but from some tactical allocations to a couple of highly undervalued asset classes – she had become so risk-indifferent as to ask what could be done to get her portfolio to outperform that of her neighbor.

Balancing risk tolerance

In practice, I’ve found that risk tolerance should really be considered in two contexts: (1) your need for risk, and (2) your ability to stomach risk.

The first has to do with your financial plan and how much you need to grow your savings in order to have enough money to support everything you want to do for the rest of your life. The higher the needed growth, the greater the risk you will need to take with your investments (and consequently the greater the potential of having to give up some of your goals).

The second involves your emotional ability to deal with losses. If you are fortunate, the two are aligned – that is, your financial situation is such that you don’t need to take on any more risk with your investments than you can handle should markets drop. Your financial life can become stressful, however, when the two are out of sync. There are many people, for example, who keep all their savings in bank CDs. Clearly they are risk-averse in the emotional sense. But they may be taking on too much risk of achieving their future goals given the potential ravages inflation can impose on a long retirement-lifetime portfolio.

In the end, I’m convinced that a financial plan will help you not only balance the two risk tolerance components, but also act as an emotional anchor when times get tough (like in 2008).

Knowing that you have a plan and maintaining the discipline to follow it can help you avoid making the kinds of risky, dysfunctional investment decisions that we as human beings are all too prone to do.

Artie Green, a Los Altos resident, is a Certified Financial Planner and principal at Cognizant Wealth Advisors. For more information, call 209-4062 or email This email address is being protected from spambots. You need JavaScript enabled to view it. .

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