FACT VS. FICTION
Looking at some common misperceptions may make risk feel, well, less risky...
Even the most conservative investors need to take on some risk if they want to reach their goals. The key is understanding and respecting risk in terms of your time horizon. Let's take a look at some common misperceptions!
While that's the classic definition, risk is more complex than that.. For example, there's the risk that inflation will eat away at the value of your investment, or your portfolio won't generate enough income. For most long-term investors, the biggest risk is not reaching their goals.
History shows us that’s just not true. Consider a hypothetical investment in the S&P 500 on Black Monday, October 19, 1987, when financial markets tumbled 20% in a single day. Someone who stayed invested for the next 10 years would have averaged a 16% annual return.* Of course, every market cycle is different and past results are no guarantee of future results. Rise Financial Group believes in keeping the sails up and staying the course. We will always build in a safety feature that allows your daily expenses to continue to be paid...
IT'S TOO RISKY TO INVEST WHEN THERE ARE MAJOR GEOPOLITICAL AND ECONOMIC CHALLENGES.
RISK IS ALL ABOUT MARKET VOLATILITY.
What’s changed direction is the market, not your investment goal, that is still the constant. Running away from risk could mean that you’ll miss all, or part of any market upturn. And more importantly, it could mean it will take you longer to reach your investment goal.
WHEN A MARKET STARTS TO HEAD DOWN, YOU SHOULD IMMEDIATELY MOVE OUT OF YOUR AGGRESSIVE INESTMENTS
The Risk of Avoiding Risk
When markets decline, it can be tempting to pull your money out until things calm down. But that could be a mistake. Even if you sell early in a downturn, it’s impossible to know the right time to get back in.
The chart below compares the returns of a hypothetical investment of $1,000 in the S&P 500 from 2011 to 2021.* Investors who remained steadily invested would have seen their $1,000 investment almost quadruple in value, growing to $3,790. However, investors who missed 40 of the best days during that period could see their investment top out at $1,005 — 73% less.
The lesson: Focus on time in the market, not timing the market.
DO YOU KNOW WHAT YOUR RISK TOLERANCE IS? ARE YOU TAKING ON TOO MUCH RISK?
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*The indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index.
Standard & Poor’s 500 Index is a market capitalization weighted index based on the average weighted results of approximately 500 widely held common stocks. Standard & Poor’s 500 Composite Index (“Index”) is a product of S&P Dow Jones Indices LLC and/or its affiliates. Copyright © 2022 S&P Dow Jones Indices LLC, a division of S&P Global, and/or its affiliates. All rights reserved.
Investments are not FDIC-insured, nor are they deposits of, or guaranteed by a bank, or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. Additional information can be obtained on any portfolio you are considering from Rise Financial Group.