Haircuts and Risk

June 22, 2020
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Risk is relative.  If you think about it, everything we do has some risk to it.  It may be so small it’s negligible, or it may be life threatening, but it’s there.  The question you ask yourself is, is the risk worth the reward?  Like many of us, I was cooped up in my house for over 8 weeks.  Finally, it was time.  I had to get a haircut, but was it safe?  I wasn’t sure.  How risky was it? 

Now I’ve had the same stylist for years, but she had moved, and her new salon had guidelines to meet the new normal - social distancing and safety.  Let me tell you, I was anxious about where I was going and what the experience would be like.  But my stylist made all the difference.  She explained that I would wait in my car until she texted.  Upon entering, my temperature would be taken.  Then she would greet me and take me back to her room. Yes, a private room!  What a relief!  When I got there, I felt completely at ease. Her guidance had given me the comfort I needed to get through this simple yet trying situation for me.

But the experience got me to thinking about the kind of risk I guide my clients through every day.  The risk they could unexpectedly lose their job and income.  Sound familiar?  Or they might run out of money in retirement.  Or worse, lose a loved one and then lose the income he or she earned.  Over the years, I’ve helped clients with all of these concerns and many more, including the one everyone is talking about today… Market Risk.

So, I have to ask, when you’re thinking about your investments are you surprised when the market goes down?  Most investors, at one time or another, have filled out some form of Risk Profile Questionnaire, but rarely do they give serious thought to how they feel about the assessment.  Have you ever sat back and evaluated your answers?  What does being a conservative or aggressive investor really mean?  One way to think of it is like this:  Conservative means Security is your greatest concern. You couldn’t sleep at night if your portfolio returns fluctuated greatly. Aggressive means you want to seek greater growth potential over the long run and are comfortable with considerable risk in the short term.  A Moderate investor means you feel a strong need to protect your assets while pursuing a modest level of growth.1 

Do you know which one you are?  Why don’t you try this: Write down how you’re feeling about your investments now, today, with all the volatility we’ve had recently.  Remember them the next time you are evaluating your risk.  Then, embrace your feelings, meet with your advisor, and together, with her guidance, devise a plan that is compatible with those feelings.  In the future, whether the market is up or down, it’s okay, because your decisions won’t be based on mere performance.  They’ll be based on how you felt emotionally during the tough times, and your success will be measured by your goals not the market.

What’s been happening in the markets recently, isn’t a “bad thing,” it’s an opportunity.  We expect the markets to move up and down, and honestly, we want them to!  If you go back to 1925, the market has delivered positive returns 73% of the time, that’s 69 years in the last 95. And in more than half of those “up” years, the market has returned gains of 20% or better.2  I hate quoting statistics, but what I’m trying to say is, have a plan and stay the course.

I can’t wait for the future; to look back and see all the positive changes that resulted from our decisions today. Please don’t wait any longer.  Don’t sit on the sidelines and miss your opportunity. Find an advisor who has the experience to help you find your true Risk Tolerance!

 1 JH Risk Profile Questionnaire what is your risk tolerance? LIFE-1864 8/15 MLINY010714027

2Jackson Market’s Been a Bumpy Ride CMV2156 01/20

 

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