Are You Trading One Risk for Another?

By James E. Wilson via

In a recent survey of over 18,000 individual investors conducted by Dimensional, (Dimensional 2017 Investor Feedback Survey), 31% of the respondents said their greatest fear was “experiencing a significant investment loss in a market downturn.” The largest group, 37%, said their greatest fear was “not having enough to live comfortably in retirement.”  The juxtaposition of these two fears being at the top of the list is very telling.

The essence of the work that we do everyday involves helping clients better understand and accept that without volatility, without market downturns, many of them will run out of money in retirement.

The premium (above inflation) long-term returns provided historically by the global markets allow for lifestyles to be maintained throughout retirement. Without these returns, you are simply exchanging one risk, (volatility), for another (loss of purchasing power). So part of the answer is to have the proper portfolio, but the other part of the answer is to have the discipline to maintain that portfolio in stormy times. One of the two won’t do, you need both.

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