“Real risk lies in how we respond to the ups and downs in the market. Just because an investor doesn’t like the ups and downs of the stock market doesn’t mean that she can afford to skip the ride if she wants to meet her goals.”
Ben Johnson, CFA, Director of Global ETF Research for Morningstar, “Remember Risk?”
The Takeaway: Ben Johnson of Morningstar makes an often overlooked but very important point here.
The real risk is not that the market will go up and down (it always does that). The real risk is that when the market goes up and down, you’ll panic and bail out.
If you do that, you are likely to miss out on the growth you need to meet your lifetime goals.
So if you are risk averse, what can you do? You certainly want to try to make sure you have the right portfolio allocation from the get-go (e.g. start off with the allocation that is truly a good fit for you, not the allocation you THINK you should have). If it gets bumpy, maybe you dial it back a bit without bailing all together. Consider using a professional to design a portfolio for you, and guide you through the rocky parts. As Ben says, you really can’t afford to skip the ride!