The question isn’t whether there’s risk in investing, it’s how much risk. Whether you’re in stocks, bonds, exchange traded funds (ETFs) or all of the above, there are four risks that always exist.
Alexander Green for Investment U reports that the biggest risks to not investing are:
- Purchasing Power Risk: Low inflation isn’t a problem at the moment, but at some point, it may be. Low inflation erodes your purchasing power when you’re sitting on cash. [3 Points of Caution With ETF Investing.]
- Interest Rate Risk: The Federal Reserve took short-term interest rates close to zero. If the central bank raises them even by one point, your Treasury bond will lose 3% – about one year’s worth of returns.
- Timing Risk: Every market timer wants to think they can get in the market for the rallies and out for the corrections. This is a risky thought and really hard to actually pull off. Try a simple strategy instead, such as this one.
- Shortfall Risk: This is the biggest risk of all – that you won’t have enough money to reach your financial goals or support yourself the way you’d like. Now is the time to take charge. You can do it on our site by checking out our model portfolios. If you’re more of a DIYer, sign up for a free trial to check out our Dashboard, where you can monitor any ETF you want. [5 Things to Consider in Retirement.]
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.