Risk or Volatility?
How should we view “Risk” in investing?
Before you answer, let’s define Risk, being careful not to confuse it with Volatility. The truth is, ups and downs of the market are volatility. They are normal and to be expected. This roller coaster effect feels like risk and looks like risk. But in reality, it is typical, normal volatility and nothing new since the inception of the stock market.
The real risk in volatility is actually “you.” Your actions are the biggest predictor of how your investments perform during normal market activity. Volatility, almost never hurts anyone, unless, you take money out when the market dips and miss the normal highs that are historically to follow.
It’s comforting to remember that the market always has, and always will fluctuate, sometimes dipping much lower than is comfortable or for longer periods than expected. This is a historical fact but is only half of the equation.
The other important half of the equation, is that it has ALWAYS bounced back and continued it’s upward trajectory, albeit somewhat erratically. It’s a challenge for any investor to feel confident when things appear to be going counter to the intended outcome.
Your peace of mind is huge and it’s normal to feel a real urge to bail out for safer terrain when your accounts drop. We just don’t want fear to be part of your long term investment strategy.
Investor behavior along with patience and a quality portfolio have always yielded the highest rewards. That’s why we’re here. We want you to have the right information to help you find the right balance to reach your goals and peace of mind. We welcome your call if you have questions or concerns about your current investment strategies.
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