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You might worry about the possibility of losing your principal or the likelihood of making a return, but beyond price volatility, other risks to be aware of include:
📌 Liquidity risk: This risk arises when you need to convert an investment into cash but face difficulties due to market conditions.
📌 Concentration risk: Occurs when a significant portion of your investments are concentrated in a single asset, country or sector. If that investment performs poorly, it can result in substantial loss.
📌 Reinvestment risk: Emerges when you need to reinvest cash generated from an existing investment. For instance, during a period of low-interest rates, reinvesting may yield lower returns.
📌 Inflation risk: In periods of high inflation, your investments may not keep pace with rising prices.
📌 Political risk: Legislative or political actions that can impact investments, such as government policies.
You want to avoid “Accidents” in retirement, and every accident is a result of a risk that you knowingly or unknowingly took on. Therefore, the key to avoiding your retirement “Accidents” begins with the identification of the risks.