It’s understandable to want to be cautious with your money. But interest rates have been low for the better part of a decade; and if that environment continues, you may need to take some risks in order to earn enough of a return to reach your goals. The challenge is in finding the right balance to make your investment risk reasonable rather than reckless.
When you think about “investment risk,” what’s the first thing that comes to mind? Do you envision a huge windfall from a stock that soars? Or do you picture yourself wiped out from a market crash? Certain people, regardless of how much they have, are simply more comfortable with taking risks than others. Neither is better or worse – they’re just different.
Knowing where you fall on the spectrum between conservative (unwilling to tolerate any noticeable downside fluctuations) and aggressive (willing to take on maximum risk for maximum reward potential) is important, however, because it helps you identify how much risk you can take on comfortably without causing you to react badly when markets fluctuate dramatically.
Generally, the further out your goals, the more investment risk you can afford to take:
While your general feelings about risk may not change over the years, your capacity to take on additional risk may very much change based on your changing financial circumstances.
Events that may reduce your risk capacity:
Events that may increase your risk capacity:
1 “The Reality of Investment Risk,” March 6, 2015, Financial Industry Regulatory Authority
*Past performance does not guarantee future results.
The financial obligations associated with caring for an aging parent can often coincide with other priorities. Of course you want to help out when possible; just don’t jeopardize your own future.
Faced with the potential to live 30+ years in retirement, the traditional approach to retirement income may no longer make sense.
Big life changes can dramatically change how much money you’re able to save each month. Keep in mind these rules of thumb when life shakes things up.
Investing for your retirement over the long term takes a little knowledge and discipline. Though there can be no guarantee that any investment strategy will be successful—and all investing involves risk—there are ways to help yourself build your retirement cushion.
In 2014, Americans gave more than $358 billion to charity with nearly three-quarters of that amount coming directly from individuals. And while much of these donations come in the form of direct cash gifts, more and more individuals are turning to planned.
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