Many investors view the stock market as risky, because they may lose money. In our eyes, it is worthwhile to have some awareness of the various types of investment risk. In our video, we share several sources of investment risk that you may not have fully considered. Below, we talk in more detail about those risks.
If I were to ask you to take your life savings, drive to the casino, walk to the roulette wheel and put all of your money on black 17… would you do it? Probably not. But why? Because it’s risky. You’ve put all of your hope in that one thing. If it works, are you a genius? Umm…no. You were very lucky. Take your money and walk away. It’ll probably never happen again.
The start to 2016 has been marked by uncertainty in a number of areas. China, ISIS, Oil, etc. Not surprisingly, this uncertainty has caused plenty of fear and, consequently, volatility in global stock markets. Also not surprising are the familiar echoes from the “talking heads” on television and even some investors to “Get out!” or do something. Of course, there is no one-size-fits-all approach to investing or risk management.
If I were to make a generalization about the people who have bright financial futures ahead of them: they are prodigious savers and investors. For the most part, they have set up their wealth accumulation plan to be automatic, via either large 401(k) contributions, large contributions into other investment accounts, or, in many cases, both.
Would you worry if the stock market closed for five months? It did just that at the outbreak of World War I. I’ll admit, that is over 100 years ago. But what if the market was only open a few days a month? I would guess that after a time, most people would actually worry less than they do now. To see why that is so, let’s talk about what a market is, and what it does for us.