Market Risk is the possibility of losing your hard-earned money due to fluctuations in the value of your investments. Unfortunately, these risks are inherent in investing and retirement planning, but they can be managed through strategic financial planning and prudent investing over time.
Typically, investors have more leeway to take financial risks during their asset-accumulation years. A Financial Advisor can help you gauge the market and determine your own risk tolerance – the potential investment loss you are willing to bear — and your expectation for returns. They can also help guide you to a portfolio of investments aligned to that risk/return profile. For example, an aggressive investor’s portfolio may contain a majority of equity investments (stocks) that offer greater opportunity for gains, but also greater potential for losses; and a conservative investor’s portfolio may be relatively more balanced between stocks, bonds and cash, offering moderate opportunity for gains and lower potential for losses.
However, when investors move into the asset-distribution (retirement) years, they often heed the conventional wisdom that they should avoid market risk by significantly reducing the amount of equities in their portfolios and significantly increasing their holdings in bonds and cash. But this itself comes with great risk. Whereas previous generations required retirement income for perhaps 10 to 15 years and enjoyed the assurance of corporate pensions and Social Security, today’s retirees may require income for 20 to 30 years, generated primarily from their own investments. By investing too conservatively in the attempt to avoid loss, the retiree may forfeit opportunities for gains and fail to achieve earnings that offset inflation. So, as usual, the key to help mitigate these potential issues is to prioritize and plan ahead.
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HO-5-21-AP (10/22) Supersedes HO-5-21-TDT (8/21) which should be destroyed. 10282
©2022 First Command Financial Services, Inc. is the parent company of First Command Brokerage Services, Inc. (Member SIPC, FINRA), First Command Advisory Services, Inc., First Command Insurance Services, Inc. and First Command Bank. Securities products and brokerage services are provided by First Command Brokerage Services, Inc., a broker-dealer. Financial planning and investment advisory services are provided by First Command Advisory Services, Inc., an investment adviser. Insurance products and services are provided by First Command Insurance Services, Inc. In the United Kingdom, investment and insurance products and services are offered through First Command Europe Ltd. First Command Europe Ltd. is a wholly owned subsidiary of First Command Financial Services, Inc. and is authorized and regulated by the Financial Conduct Authority. Certain products and services offered in the United States may not be available through First Command Europe Ltd. In Germany, we provide financial planning services through Financial Planners associated with First Command Europe Ltd. Diversification, asset allocation and portfolio rebalancing do not guarantee a profit or protect against a loss in a declining market. They are methods used to help manage risk. Investment returns and principal value will fluctuate and your investment, when redeemed, may be worth more or less than its original cost. Sales charges and taxes may apply.
First Command Financial Services will host a free financial planning event on Aug. 17 from 6 to 7 p.m. at Office Now, 1860 Wilma Rudolph Blvd. Reserve your seat today by calling Kacie at 931-249-9154.