Managing Risk
Diversification is key to managing risks
At this stage in life, you may discover you are better positioned to withstand short-term market fluctuations than someone nearing or in retirement. We can work with you to identify the risks most relevant to your situation, as well as to determine the appropriate allocation of assets to balance these risks, which may include:
MARKET
Fluctuation or volatility in the performance of financial markets. How and where your assets are allocated across different asset classes plays a key role in managing market risk.
INFLATION
Costs of goods and services increase over time. Your cost of living at retirement might be higher than it is now, as inflation erodes the value of your savings and reduces your purchasing power over time.
LONGEVITY
Longer life expectancies mean the assets you save toward retirement will need to last longer. As you determine your savings goals, consider you may need your assets to generate income throughout a 20- to 30- year retirement.
Diversifying your savings among several asset types may enable you to take advantage of growth potential in different sectors and various financial markets. You may want to avoid placing your retirement savings in one type of asset, so to balance performance in times of market fluctuation. Also consider dollar-cost averaging which is the process of making regular investments on an ongoing basis, regardless of price. This can make the average cost of your investments lower than the average market price over time. Although dollar-cost averaging may not mitigate market, inflation, and longevity risks, it typically offsets their impact on the value of your investments.
Contact us for more information on how we can work together to manage these risks by applying a comprehensive process to plan for your retirement.
Diversification and Dollar cost averaging do not assure a profit and does not protect against loss. Dollar cost averaging involves continuous investment regardless of fluctuating price levels of such securities. Investors should consider their financial ability to continue purchases through periods of low price levels.
