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The Risk of Not Taking Risks When Investing

admin by admin
December 22, 2021
in Investing
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The Risk of Not Taking Risks When Investing

The discipline to save a portion of your salary is admirable. The thought of any of that hard-earned money being lost can be a hard pill to swallow. But this is exactly the risk that you are taking when you invest your funds in the stock market. The possibility of the economy crashing or an unforeseen downturn can make some physician investors hesitant about market exposure. So, would it be better to just keep your savings in low-risk vehicles such as CDs and money market accounts? Financial advisors overwhelmingly advise investors that not taking risk is a risk in and of itself.

Playing it safe can be just about the most dangerous thing you can do, as Nicholas Cage reminds us in Moonstruck. Investing is not a romantic comedy, but if it were, he would be spot on. Although there is no guarantee as to the rates of return from the stock market, NerdWallet tells us that the average stock market return over the past century has been 10%. The Motley Fool gives us an even narrower average, pointing out that—from 2011 to 2020—the annual stock market return based on the S&P 500 was 13.9%. Both sources are quick to note that returns can wildly vary and are dependent on the specific stock holdings an investor carries. Regardless of these prudent disclaimers, the odds are in your favor regarding investing in the market. If you apply a diversified approach to the stocks you purchase, you should be well-positioned to attain your savings goals. By maintaining exposure to a variety of sectors (ie, healthcare, technology, retail, etc.) and types of companies (ie, large cap, small cap, mid cap, etc.), you can alleviate some of the risk. You should also consider asset allocation, which would mean investing in assets such as bonds, real estate, and money market accounts in addition to stocks.

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