At Weatherstone, we recognize that not all investment risk is worth taking. As you move closer to retirement, or as you are going through your retirement, you may be looking for more predictable outcomes. You want less risk in your investments compared to when you had lots of time until retirement and were primarily focused on building your retirement nest egg. Why? Because it has taken years of hard work, sacrifice and regular contributions to investment accounts to accumulate enough savings to feel confident enough to leave the safety of the workforce. Once you retire, income from your investments may be an important piece of your retirement income and financial security.
Sometimes investing can seem quite easy; you own investments that regularly and consistently move higher, and you see your money grow much faster than if you had put it into “safe” investments. However, market conditions can and do change. You may see years of gains wiped out in matter of weeks or months, and you may then wonder if the risks of being invested in financial markets are worth it.
If you are young enough, you may just lose time making up the ground you lost. But, if you are close to retirement or in retirement, the impact of such a decline may be significantly worse, because you may no longer have the luxury of time. Significant market declines at this stage of your life may require you to postpone retirement or worse! One of the most important decisions you make in retirement may be whether to avoid the asset classes that helped you build your retirement nest egg in order to avoid serious damaging reductions in your investments.
The Importance of a Flexible Approach to Taking Risk
Adding flexible, risk measured investment strategies as part of your investment portfolio may be the answer.
By using various risk measurement indicators, it is possible to continue investing in asset classes that provide the best potential for growth and still have a way to avoid possible damaging drawdowns. By owning growth oriented assets during periods when taking that risk has historically been rewarded, and moving to safer investments such as bonds and money market when risk levels are unattractive, you can control possible damage and still take advantage of good market opportunities.
Such an approach is not necessarily designed to provide higher returns than a market index on a regular basis, but rather it is designed to provide more stable returns over time. This is done by smoothing out the ups and downs of the market over a full market cycle with the ultimate goal of helping you achieve the target rate of return that you need in order to reach your personal goals.
At Weatherstone, we recognize the changing nature of markets. We believe in taking a risk measured approach, meaning that we focus first and foremost on protecting the wealth that you have built, and then taking risk when it has historically been rewarded.