5 Biggest Investment Risks You Face
Inflation Can Erode Purchasing Power
Every investor is aware about the fact that inflation can cause huge risk on his or her investments. But what many people, especially those nearing retirement, don't understand is that inflation can just take away your returns on the investments made.
"Inflation risk can be devastating," said John Gajkowski, principal of Money Managers Financial Group in Oak Brook, Illinois."Even though they are getting the same pension check, what they can buy with that check goes down every year, depending on inflation," he adds.
So, the only remedy or precautions investors need to take is be aware of the risk when investing, especially for conservative investors.
Interest Rates Affect Bonds
For some years, investors have enjoyed record low interest rates, but they shouldn’t take into consideration that the interest rates aren't going to remain low forever. By doing this, investors are poised to face more risk.
In order to counter these risks investors need to stay away from long duration bonds and stick towards short and medium-duration ones.
"A lot of people want to take risk or don't want to take risk, based on how it makes them feel," said Kisner of Surevest. "But how much risk you should take is based on what gives you the highest probability of achieving your goals, not based on emotion."
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