Risk is everywhere, every day. But when it comes to your money, taking on too much risk can mean not reaching your goals.
Does your portfolio’s risk level match your motivations and time horizon?
Risk is fundamental to investing and is personal. Some risks are avoidable while others are not.
Avoidable risks are those that take place when your portfolio holds too many stocks or bonds that have been unstable in the past or when your portfolio is not diversified. For example, you may hold too much of your company’s stock in your 401(k) plan or another account. Or you have too many overlapping U.S. stock mutual funds, instead of being more globally diversified. Avoidable risks often occur when we underestimate risk and believe we can tolerate more than we actually can.
On the other hand, unavoidable risks are those that occur because our world is ever-changing, volatile, and unpredictable. As much as we wish we could, unavoidable risks are simply out of our control.
Your risk tolerance is based on your unique circumstances, stage of life, and personality. Click here to see your risk tolerance.
What can you do to cut down on the avoidable risks that may be lurking in your portfolio? Click here