Risk, of course, is highly subjective. Many would like us financial planners to define risk on a client’s behalf, however it is important to put this into context when it comes to creating a financial plan.
What is it that worries you more? The risk that the value of your long-term investment portfolio will suffer temporary declines? Declines that will ultimately prove meaningless during a 30-year+ investment timescale? Or the risk that you will fall short of hopes and dreams for the future or worse, run out of money during a retirement that you’ve worked so hard to save for.
Without investment risk, there is no investment return. Without investment return, there is no chance of financial freedom. Next time you’re faced with questions about ‘risk’, take a step back and ask yourself what this truly means in your life.
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