This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
Despite what a quick search on Google will tell you, every investment has risk. In fact, risk has a direct correlation to volatility, behavior and survivability. While volatility is not risk, “volatility can create risk because of how human beings [or you, as an investor] react to it.”READ THE ARTICLE
What is risk? Once you acknowledge and accept that all investments are risky, you will understand what is at the root of all risk (and most-feared by investors): Uncertainty. Improbable and uncertain events happen more often than you realize, and given this, it’s wise to make financial decisions where you “don’t have far to fall, but have lots of room to jump.” The end goal? Pursue financial opportunities that do not just compensate you for the assumed risk, but could reap you big rewards.
A necessary evil: Pinpointing these opportunities is easier said than done. As investors, we continually weigh every choice against price, but the thing about price is that it goes beyond a dollar amount. The “price” of an investment could also be an “opportunity cost, customer/supplier concentration, etc.” Any financial decision you make comes at a cost with varied, potential rewards, but with no risk, that reward is capped. To create more “upside variance” in your investment risk, ask yourself:
📌 What’s the downside of the decision?
📌 What’s the upside of the decision?
📌 What’s the price I pay?
Summed up: There are only two places you can put money: Those that are safe and those that have risk. Determining the appropriate balance of each will be key for your retirement strategy.