Managing Investment Risk

It’s all about risk and how you feel about it. Financial markets tend to go through peaks and valleys and, after a valley, it normally takes 3-5 years for the market to fully recover and to surpass the pre-valley levels.

The mixture of the financial products in your portfolio should change as you age and have less tolerance for market volatility. For example, a person just retiring at age 60 might reasonably expect to have 30 or more years of retirement ahead of him. At that young age, he/she could take a little more risk than a person 75 or 80 years of age.

After all, if the market goes into a valley, it’s likely that the young retiree will have plenty of time for riskier investments to recover and advance. The older retiree, though, can ill afford to handle to market volatility of riskier investments and needs to be invested more in bonds and more stable investments.

Make sure that you discuss your risk tolerance and expectations with your financial planner or broker. If you manage your own portfolio, be certain to read everything you can find on Risk and Asset Allocation in retirement.

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