A key to investing well is finding balance between opportunities for growth and the potential risks that come with them. You want to generate returns needed to meet your long-term goals while limiting the potential portfolio risks associated with downside volatility and other adverse events.1
Practically every investor faces the following four risks to their portfolio. While each risk can be addressed in specific ways, start with good planning with your financial advisor, regular updates to your investment plan and being properly diversified. Then move on to the more specific methods below.
To paraphrase Boston money manager Newfound Research, LLC, ‘investors don’t live in a world of “100 year averages.” Instead, they live in a world of 40 year investment horizons, where significant declines can permanently impair retirement portfolios as investors do not necessarily have ‘more time’ to make up from large losses.’2
According to the Social Security Administration, a man turning 65 today is expected to live to age 84, and a woman of the same age will reach 86 on average. About 25% of 65 year olds will live past age 90.3 For many, that means several years of pulling retirement income from your investments, which can increase the risk of outliving your savings.
A recent study by JP Morgan shows that since 1985, inflation has increased at a faster pace for those aged 62 and older. The rising cost of health care plays a significant role in that, and for retirees it could mean increasing expenses over time. The risk here is spending down your savings at a faster pace than you anticipated.4
Sometimes life hands us surprises, and sometimes those surprises result in unforeseen costs. Whether it’s the need for extensive medical care, helping out a relative or a friend, or losing a source of income due to circumstances you cannot control, the risk could affect your retirement income strategies.
One of our Wealth Managers can take a detailed look at your portfolio, while helping you assess each of the risks above. We can discuss ways you can adjust your portfolio to better position yourself against them. Call us at 1-800-541-7774 to have the conversation today, or answer a few brief questions here to get started on your investment plan.
Michael is a Certified Wealth Strategist and Wealth Manager at WrapManager, Inc.
Sources:
1 Wells Fargo
2 Newfound Research LLC
3 Social Security Administration
Strategy descriptions listed represent a brief outline of the portfolio’s objective. There is no guarantee that any manager or product will be successful in achieving the objective described. The strategy used by the money manager listed is not suitable for all investors. This material does not represent a personalized recommendation and does not reflect individual investor’s risk and return goals nor does it serve as the receipt of, or a substitute for, personalized advice from WrapManager, Inc. or any other investment professional.