Market risk is just one risk of many
Losing money in the stock market is not the biggest threat to your wallet.
People without a large amount of money saved for retirement run the risk of outliving their savings. Those who invest only in very safe investments risk losing purchasing power to inflation.
“Even though investing seems risky, not investing means taking risks, too, when you consider the long-term threat of inflation,” says CFP professional Peter Lazaroff, co-chief investment officer at Plancorp in St. Louis.
“If you don’t grow your money, you may not be able to afford things in the future,” Lazaroff says. “So, you invest to grow wealth and preserve purchasing power.”
To mitigate the risk of inflation, investors don’t need to reach for high returns.
The historical rate of inflation is around 3 percent. A diversified mix of safe and riskier investments would provide portfolio growth without the danger of it completely cratering in a market downturn.
The stock and bond markets are vast