The headlines are filled with stories on the potential for inflation, rising interest rates, new government economic and taxation policies, fluctuating currencies — including cryptocurrencies — high-priced stocks and more.
Each of those stories, however, represents a different form of risk, and the varied news is the market’s way of suggesting that investors might want to reconsider their approach to risk now, before any of the storm clouds becomes a deluge.
To do that, investors need to look at how risk works and reconsider the various risks they’re facing.
No matter which dark cloud you fear the most, there is no way to avoid all potential issues or quell every fear.
Say, for example, money-losing investments are your biggest fear; if you go all-cash in response, your big worry is reduced, but you face an ongoing threat that your money won’t keep pace with inflation or, perhaps, that you’ll outlive your nest egg.
Even if you take the extreme all-out position, your fear of missing out could be realized if the market keeps rolling while you’re on the sidelines.
To assuage your fears and balance your portfolio both for the market and against risk, consider the various risks you’re facing.