When investing, we all have different appetites and understandings of risk. Our views around this 4-letter word result from past experiences we have had, read or heard about. This emotional response seldom serves us. Perhaps the best way to understand real risk is to not focus on the money or the markets.
At Client Care, we have a different understanding of risk from many of the people we work with and part of the process we take new clients through aims to help them understand what real risk is.
Let’s take a look at what we see as real risk.
The number 1 question everyone has is, “Am I going to be ok?” Put differently, this means, “Am I going to outlive my money?” A scary thought.
Other real risks we should consider important are:
Not achieving your cherished life goals.
Not understanding stock market history.
Choosing short-term comfort over long-term security.
Moving to cash during a temporary decline.
Falling in love with what’s working now.
Following the news rather than your financial plan.
Going all-in on one stock.
A plan with no options.
Permanent loss of your hard-earned capital.
Forgetting that inflation is the real enemy.
Missing out on the next stock market advance.
Not saving enough for your future.
Trying to time the stock market.
Not insuring your income.
Not knowing what you don’t know.
Unfortunately, the financial services industry does a great job of confusing the general public to believe they need complicated products and funds to build real wealth. Nothing is further from the truth.
Real wealth is built by understanding that our behaviour around investing is all we need to focus on. Markets go up, always. So buy the great companies of the world (stock market) and focus on the things we can control, such as living within our means and understanding what makes us happy.
Build your long-term financial plan and stick to it. If something seems complicated, wonder why that is? Simplicity works; accept it and behave yourself to wealth.
Dirk Groeneveld, Certified Financial Planner
t. 083 261 9287