Top 5 Factors that Can Derail a Baby Boomer’s Retirement – Factor #5: Failing To Position Investments For Growth


Factor #5 – Failing to Position Investments for Growth

This is the last of 5 articles in the series, which has focused on the top threats to retirement. Although each individual or couple may face many other challenges along life’s path, what I have tried to do was to point out some of the most common major threats. The final threat I am going to discuss is failing to position investments for growth. Ralph Waldo Emerson put it best:

“It requires a great deal of boldness and a great deal of caution to make a great fortune and when you have got it, it requires ten times as much wit to keep it.”

Let’s take a look at that quote for a moment. What exactly did he mean? Isn’t his advice contradictory? He indicates that you need a great deal of boldness and a great deal of caution. Is that possible? Absolutely, but it requires a strategy, a plan of what are your goals and the steps to take in order to accomplish them. As our world continues to get smaller through the use of the Internet, it is naïve for us to think that this hasn’t affected investment strategy. Let’s consider the alternatives.

A too-conservative investment strategy can be just as dangerous as one that is too-aggressive. It exposes your portfolio to the negative effects of inflation and limits the long-term upside potential of that offered by diversified stock investments. On the other hand, being too aggressive can mean undue risk in down or volatile markets. What may help is a strategy that seeks to keep the growth potential for your investments, but helps to limit your exposure to higher levels of risk.

How much risk should someone be exposed to? That depends on a number of factors, which varies for each person and family. Generally speaking, I work with many of my clients to put together a diversified portfolio that includes such things as a mix of stocks, bonds, commodities and short-term investments, all blended in a way that takes into consideration their risk tolerance, overall financial situation, and investment time horizon. I also stress how critical it is for them to revisit their goals, plans, and investment strategy periodically, especially if they have a major event, such as marriage, divorce, job promotion, loss of job, birth of a child, death of a child or spouse, selling or purchasing a home, etc.

Why? Because many of these situations can change the amount of market risk to which a person could be exposed, and that could have a dramatic impact on long-term goals. Proper management of market risk may help you obtain the growth you need in a way that lets you sleep at night, but also keep in mind that diversification/asset allocation does not always ensure that you will make a profit or that it will keep you from having losses.

If you are unclear as to how much risk you are exposed, how much you should be exposed to, or if you do not have a plan, give us a call to assist you in putting one in place. Let us help you get Szarka Smart!

Individual circumstances vary. No investment strategy can guarantee a profit or protect against loss. Investing is subject to risks including loss of principal invested.


 More Articles >>>