Investment Risk That Affects Your Life vs Investment Industry Risk

Did you know that how you define risk can actually make or break your retirement?

This video and podcast episode offers you a direct head-to-head comparison of two different outlooks on the world and on investment risk.

Defining risk is critical to decide the best investment strategy for you.

People with the right outlook on risk retire comfortably, while others do not. 

You’ll learn how to think about risk properly, so you can retire comfortably.

This is a really important topic for you to understand and one I’m extremely passionate about. We care about our clients too much to kill their future with the normal financial advisor methods.

Watch, listen and read to find out:

• How does the investment industry define “risk”? 
• What is “investment risk that affects your life”?
• What is wrong with the investment industry definition of “risk’?
• How does this difference affect your investment strategy?
• How does thinking properly about risk help your retirement?
• Why do almost no Canadians retire with their desired retirement?
• How can you learn to think properly about investment risk?
• The risk tolerance questionnaire and mistakes most financial advisors make.
• How to be successful in retirement.
• The good and bad news about financial planning.
• How much to invest in a balanced portfolio.
• The long-term risk of stocks vs. bonds.
• How inflation increases your risks in your retirement plan.
• How your Interactive Financial Plan clearly shows how investment risk affects your life.

How does the investment industry define “risk”?

• Risk tolerance questionnaire.
• Short-term fluctuations (standard deviation).
• Standard deviation – Statistical measure of uncertainty.
• Over-regulated industry focused on minimizing complaints, not your returns.
• Try to force bonds on all investors because of compliance & marketing.

What is “investment risk that affects your life”?

• Risk of not achieving the life you want.
• Risk that your long-term return doesn’t give you the life you want.
• Wholesome & holistic outlook.
• Growth-focused, optimistic view of your life.

What is wrong with the investment industry definition of “risk”?

• Short-term risk. Markets recover.
• Focus on risk tolerance, not investment education.
• Focus on risk tolerance, not life or your financial plan.
• Leads you to invest too conservatively to retire comfortably.
• They assume you do not learn from education or experience.
• They assume how you answer a risk tolerance questionnaire is who you are as a person – permanently.
• It’s mainly behavioural risk.

Stock market has recovered from 100% of declines.

The risk that you will do something when your investments are down.

 “We have met the enemy – and he is us.” (during War of 1812)

How does this difference affect your investment strategy?

• Risk tolerance questionnaire labels you as “moderate” or “conservative”.
• Financial advisor recommends bonds or balanced funds.
• You cannot retire comfortably with bonds or balanced funds.
• ”The Risk of Bonds to Your Retirement”.

How does thinking about risk properly help your retirement?

• Most or all equities.
• Bonds are the most risky. They have the highest risk of a 30-year return below 8%/year.
• More leverage (possibly). Smith Manoeuvre?
• Long-term returns of 7-8%/year become conservative assumptions, instead of 5%/year.
• This difference is huge over your 60-70-year investment life.

Investments double every 9 years instead of every 14 years.

• Changes your thinking: Growth-focused, optimistic life.
• Retire far more comfortably.
• Retire with less tax.

Why do almost no Canadians retire with their desired retirement?

• Most retirees settle for the retirement they get, not what they want.
• Financial advisor does not prepare a professional financial plan. Both you and the advisor are unaware that you will not retire comfortably.
• Comfortable retirement does not happen on its own.

Requires regular & effective investing, and a Plan.

• Bad news of Financial Plan: You need much more than you think to retire comfortably.
• Good news of Financial Plan: You can get there more easily than you think.
• Nobody can retire comfortably with balanced or conservative investments.
• No Financial Plan is like driving without a GPS.

Retirement plan real-life examples.

How can you learn to think properly about investment risk?

Get educated about short-term & long-term risks of stocks & bonds.

“Stocks for the Long Run”

Learn that risk tolerance is a learned skill: The ability to do nothing when your investments are down.

How your Interactive Financial Plan shows you clearly how investment risk affects your life.

Get a Financial Plan. Know the return you need for the life you want.

“Interactive” Financial Plan:

Design the life you want.

Work through life options: Doable & what you want.

Plan your life. Live on purpose.

See clearly how today’s decisions affect your desired retirement.

Ed