A solid investment strategy seems to work until something comes out of left field to knock it off track. 

You know, as the former heavyweight champ Mike Tyson is known to have said that, "Everyone has a plan until they get punched in the mouth."

And in the investing work, we sometimes call these big, unexpected market and economic events "Black Swans."

So, why should you care about Black Swans?

Well, you should care because how you respond to these significant events can make the difference between reaching your financial goals and seeing them fall short.

You see, it's one thing to understand that financial markets are inherently volatile and how diversification can help you reduce some of these risks.

Add in a little asset allocation and just spread the risk out across various investments, right?

Certainly, yes.

However, it's another thing to be able to emotionally stick to your strategy when the markets seem to be wholloping your best-laid plans.

Indeed, without truly understanding your own tolerance for risk, those inevitable Black Swans can lead to poor decision-making, lead to heightened emotional stress, and bring about a higher likelihood of not achieving your financial goals.

That's why by truly understanding risk tolerance, identifying tools for evaluating your own tolerance for risk, and finding the right balance between risk and reward, you can enable you to become a better investor in the year ahead by helping you make sound investment decisions, and allowing you feel more confident even when the economy or markets are at their worst.

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