"Rule
No.1: Never lose money. Rule No.2: Never forget rule No.1." –
Warren Buffett1
Provided by Taylor McClish
Risk is a factor
in any investment decision that you make. Your tolerance for risk is something
that you will want to consider when you make decisions alongside your trusted
financial professional. Your risk tolerance is balanced against your time
horizon, meaning the time between now and your anticipated retirement date.
But is it
possible to avoid a loss? No, not completely, but you can take steps to manage
that risk when investing. This is where conversations about your risk tolerance
are critical.
What would you
rather have, $500 right now or a 50% chance at $2,000? Many people go for the
$2,000 and rightfully so. Since you have a 50/50 chance, a decision tree shows
the $2,000 answer carries a potential value of $1,000.
But let’s add a
few zeros and see if that changes your perspective.
What would you
rather have, $50,000 right now or a 50% chance at $200,000? The decision tree
says the opportunity to win $200,000 has the highest potential value. But in
reality, many people second-guess that decision because $50,000 is a lot of
money.
Remember, there
is no correct answer to the questions. They simply help you better understand
the concept of risk.
Investment risk
can be managed, but it can’t be eliminated entirely. All investments carry some
level of risk. And in general, the greater the risk an investment carries, the
higher its potential return.
Risk happens,
but don’t let it get in the way of your dreams. Ultimately, these concerns
should only serve to inform you and the questions that you ask the financial
professional you are working with. The conversation should include your
questions about the risks for each strategy presented as well as questions from
your professional about the retirement you want and the aspirations you hope to
realize.
Taylor McClish may be reached at (503) 239-3060 or Taylor.McClish@cunamutual.com
This material was prepared by MarketingPro, Inc., and does not
necessarily represent the views of the presenting party, nor their affiliates. This
information has been derived from sources believed to be accurate. Please note
- investing involves risk, and past performance is no guarantee of future
results. The publisher is not engaged in rendering legal, accounting or other
professional services. If assistance is needed, the reader is advised to engage
the services of a competent professional. This information should not be
construed as investment, tax or legal advice and may not be relied on for the
purpose of avoiding any Federal tax penalty. This is neither a solicitation nor
recommendation to purchase or sell any investment or insurance product or
service, and should not be relied upon as such. All indices are unmanaged and
are not illustrative of any particular investment.
Securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor. CBSI is under contract with the financial institution to make securities available to members. Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America.
Citations.
1 - finance.yahoo.com/news/warren-buffetts-investing-rule-no-154251030.html
[9/5/19]