Why do we considering 60% for IRA assets, 70% for stocks and Large deposit definition

Question

Accepted Answer

Assets are considered differently based on their liquidity and volatility.

IRA assets are considered less liquid and more stable, hence 60% is considered
Stocks are more volatile and hence only 70% is considered
Large deposit definition varies based on the bank's policy
This approach helps in assessing the risk associated with different types of assets

Accepted Answer

Yes, you're correct. The approach to assessing assets based on their liquidity and volatility helps in evaluating risk and determining the appropriate weight or consideration for each asset type.

- **IRA assets**: Typically, these are less liquid and more stable, which justifies using a higher percentage (like 60%) to reflect their lower risk and lower volatility.

- **Stocks**: These are more volatile, so a lower percentage (such as 70%) is used to account for their higher risk.

- **Large deposits**: The definition of a "large deposit" can indeed vary between banks, and this variation affects how those deposits are considered in risk assessments.

Overall, adjusting the percentage used for different asset types based on their liquidity and volatility helps in creating a more accurate and risk-adjusted financial assessment.

Accepted Answer

The approach you're describing seems to involve assessing the risk associated with different types of assets by considering their liquidity and volatility. Here’s a summary of how this works:

1. **IRA Assets**: These are generally less liquid and more stable. Consequently, they are often considered to a lower percentage (e.g., 60%) when assessing risk.

2. **Stocks**: Stocks are more volatile and liquid. Therefore, a higher percentage (e.g., 70%) might be used to reflect their riskier nature.

3. **Large Deposits**: The treatment of large deposits varies by bank, and their impact on risk assessment can differ based on specific policies.

By adjusting the percentage considered for each asset type, this method helps in better evaluating the risk associated with a portfolio by accounting for each asset's unique characteristics.

Why do we considering 60% for IRA assets, 70% for stocks and Large deposit definition

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