By D. Scott Peterson
1. What does the concept “risk” really mean when applied to the financial markets?
2. Some pundits oversimplify the term by saying it means, “you will lose money,” or even “you could lose all your money.”
3. But the short term risk is always a moving target; it changes from day to day, week to week, and so on.
4. Certainly your account value will go up and down. Everybody knows that.
5. But isn’t that risk tolerable if the account value goes up over the long term?
6. If you’re saving/investing for retirement, isn’t it more risky to do nothing, or not to invest your savings in the right assets to have the best chance to grow your wealth?
7. Can we even say it’s essential to take this risk?
8. The answer is yes, because the risk of not having enough money to retire is intolerable.
9. That’s your biggest risk.
10. Don’t take that type of risk.