IN Bethel Park Fall 2019 | Page 27
INDUSTRY INSIGHT
YOUR FINANCES
SPONSORED CONTENT
HOW MUCH MARKET RISK ARE YOU REALLY WILLING TO ACCEPT?
I
f you’re like a lot of investors, you may
have trouble quantifying the level of
risk you are comfortable taking on in
your portfolio. Do you like to play it
safe, staying in conservative investments
even if it means potentially missing out on
bigger returns? Or are you willing to take on
more risk in the hopes of capturing higher
gains? If you’re not sure where you land on
the spectrum, consider the following eight
tips to help define your views on investment
risk:
1. Define your goals. Your financial plan
should be structured to help you get from
where you are now to where you’d like to
be with key goals, such as saving for your
child’s college education or retirement.
Your investment strategy should be a key
part of this financial plan. Define exactly
how much money you will need to save,
and when you will need it by. When your
goals are crystal clear, it can be easier to
weigh the various risks and choices you
must make to achieve them.
2. Consider the general market
environment. It seems fair to say that
investors’ willingness to accept risk
increases in periods when the stock
market has performed well for an
extended period of time. In the past
decade, stocks have generally been on the
upswing. On the heels of such a positive
market, investors’ level of confidence
about owning assets that are subject to
fluctuation may be higher. By contrast,
investors sometimes become more
skittish in periods when markets are
struggling. Confidence in stocks and other
variable investments tends to decline
when the market is not performing well.
3. Accept market moves as normal. It’s a
known fact that stock markets move up
and down—sometimes significantly—
which means there’s always risk that a
particular investment could lose value.
Keep in mind that historically markets
have recovered, and the reward potential
of investing in future growth of global
businesses remains strong. Prepare
yourself for the fact that investing is not
a smooth upward climb, and a smart
strategy can help the market moves work
in your favor.
4. Recognize that time is one of the
biggest influences on risk tolerance.
If you have a decade or more to reach
your goals (such as retirement), you likely
can ride out market downturns or even
extended flat or negative markets. If you
expect to reach your goals (such as a new
home) in the next few years, you may
need to think more about how to protect
your investments against the impact of
market moves. With this in mind, your
risk tolerance will likely adjust as you get
closer to achieving various goals.
5. Trust your instincts, but don’t make
decisions solely based on emotions. If
you are worried about what’s ahead in the
markets or how your finances would fare
if another Great Recession occurs, it may
be time to reassess your portfolio to take
some risk off the table. Yet, it’s important
to not be overly swayed by day-to-day
headlines. Look for consistent, long-term
trends or events that impact market
fundamentals before considering action.
And, be sure that any decisions you make
align with your financial goals, as defined
in tip #1 above.
6. Consider purchasing power risk.
Inflation is always a factor worth
considering. Simply stated, your money
more than likely won’t be worth as much
in the future as it is today. It is important
to own investments that can help your
asset base at least keep pace with
inflation, and hopefully grow faster than
the cost of living.
7. Be mindful of interest rate risk. Fixed
income instruments such as bonds carry
their own risks, one of them being that if
interest rates rise, bond values will decline.
Given that yields are slowly rising from
historically low levels, this risk may be
more significant today.
8. Explore ways to stay invested in the
market while mitigating some of the
risk. Maintaining healthy diversification
across a variety of asset classes is a key
way to manage risk. Staying invested for
the long term and not trying to time the
market is another. Dollar-cost averaging,
or investing consistent amounts of money
at regular intervals, rather than investing
lump sums at one time, can help you
remain committed to your saving strategy.
Additionally, products (such as variable
annuities) that allow you to continue
to participate in the market’s growth
potential while locking in gains may also
be worth considering.
Given your timeframe, current savings,
income and other financial priorities, how
much risk are you willing to take to achieve
your goals? This is the ultimate question
you need to answer to determine your risk
tolerance. If you want help deciding whether
your portfolio is appropriate for your feelings
on risk, consult a financial advisor who can
provide a second opinion.
This Industry Insight was written by Jonathan D. Martin.
Jonathan D. Martin is a Financial Advisor with Ameriprise Financial Services, Inc. in Bethel Park, PA. He
specializes in financial planning and asset management strategies. Contact Jonathan’s office at 412.831.6240
extension 202, located at 88 Fort Couch Road, Suite 210, Pittsburgh, PA 15241, or visit his website at
www.ameripriseadvisors.com/jonathan.d.martin. Jonathan is licensed/registered to do business with U.S.
residents only in the states of PA, OH, WV, AZ, CA, FL, IL, IN, NC, NJ, OR, SC and VA.
Diversification and dollar-cost averaging does not assure a profit or protect against loss.
Investment advisory products and services are made available through Ameriprise Financial Services, Inc., a
registered investment adviser.
Ameriprise Financial Services, Inc. Member FINRA and SIPC.
© 2019 Ameriprise Financial, Inc. All rights reserved.
Meet your future with confidence.
Jonathan D. Martin
Financial Advisor
412.831.6240 ext. 202
88 Fort Couch Rd, Ste 210
Pittsburgh, PA 15241
[email protected]
ameripriseadvisors.com/jonathan.d.martin
Ameriprise Financial Services, Inc. Member FINRA and SIPC. © 2019 Ameriprise Financial, Inc.
BETHEL PARK
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