Playing it too safe
Of course, one way to avoid risk is just not to suit up for the game. But that puts you in danger of not having enough money in later years, and of missing major market advances.
“What you don’t want to do is just focus on the risk and cap your upside,” said Harold Evensky, a financial adviser in Coral Gables, Fla. “Returns come in short spurts. If you miss one, you’ll never recover it.”
Your best bet: If the “sleep at night” factor is most important to you as an investor, then bank any money you might need over the next five years, Evensky said. That way, you won’t be as tempted to unload assets when the going gets tough.
You still might feel queasy when markets gyrate, but that’s the point. The late Peter Bernstein, a sage chronicler of financial-market history, once observed that “if you’re comfortable with everything you own, you’re not diversified.”
His advice: “You hate bonds; you ought to own bonds. You hate gold; own some gold. You’re scared to death — own stocks because maybe things will have a happy ending.”
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