Risk Analysis

Let’s take a few minutes and talk about risk. I know we talk about that quite and often and you know by now that we offer risk assessments here at the office. So we can take a portfolio and digest the risk of that and talk about that. I want to take a little bit of different look at this today, though. Oftentimes, we just talk about equity risk. You know risk of being in the stock market and of its ups and downs and what if the market went down a certain percentage, where would that leave you? That’s still a huge piece of that. But I want to give you 10 other risks today that we look at on an ongoing basis that maybe you’re not considering. One, interest rate risk. Very important today with a low rate environment. When you’re looking at this, what if your investment is renewing at a different interest rate down the road? It can sometimes alter the underlying value as well. Currency risk, when you look at this, you know the appreciation or depreciation of a specific currency that controls depending upon where you’re invested. Exchange rates, think of that. Liquidity risk, what if the investment you’re in you can’t readily get it to cash in a time of need? Concentration risk, what if you have all of your stuff in one basket or very similar stuff? What would that look like? Credit risk, this is particularly pertaining to investments that have a credit rating to them. What if it changed after you invested something where they maybe went south, in a way. So credit ratings, what does that have to do with that? Then reinvestment risk. What if you’re trying to reinvest in stuff continuously? And either that investment changes or the opportunity isn’t as good when you go to reinvest. Inflation risk, this is a real thing today. Is the investment you’re in keeping up with inflation? Is it controlled by inflation in one way or another? Horizon risk, what if the timeline or your line in the sand down the road changes? What if you need this money sooner, okay? In often cases, what if you were forced into early retirement and the investments you were in didn’t account for that? Longevity risk, the idea of outliving your money. What if you lived a really long time? Are your investments prepared for that? And finally foreign investment risk. Obviously what if the rules or regulations change if you are invested internationally and either A, getting the money back or some rules change that cause that investment to not be as profitable. So those are 10 risks out there that aren’t commonly talked about as much as market risks, that are things that we have to be considering especially in today’s environment. You know when you’re planning for your retirement and you’re putting all of this on the line for 20-30 years of your retirement. We need to be looking at this. Take the time, analyze your portfolios and understand not just the market risk you have, but the other risks that are weighing against. this. You don’t want to be surprised at some point down the road if things change and you don’t have that. Trust me, I know that there’s a lot of folks out there, their biggest worry at night is running out of money. You know what? When we can look at these, let’s try to take some of that guessing out of it so you can have a good holistic plan to make sure that your retirement is planned well.