The higher your number, the more we'll boost your fixed-income allocation. We'll also suggest a bigger helping of large caps since they are most likely to have dividends. Generally speaking, the higher your tax bracket, the more you want to avoid income-producing investments. Taxes on that income can bleed your returns. But if most of your wealth is in tax-deferred retirement accounts, income doesn't matter.
Many people tend to overestimate their tolerance for market volatility.
If the answer to any of these questions is yes, you may want to set your risk tolerance no higher than medium. We're not talking about the outlook for the next several months. Rather, we want your opinion of where we are in the broader business cycle. If you think the current economic expansion will continue, that argues for a bigger portion of stocks. If you believe we are in the later stages of an economic cycle, bonds make more sense, because as the economy slows, interest rates usually fall, boosting bond prices.