Financial Planning For The Risk-Averse

By Joe Vitale

If you’re apprehensive about investing in the stock market, you’re not alone. Recent market crashes have caused long-term investors to panic and wonder whether their hard-earned retirement savings are safe in their current portfolios.

You might be feeling risk-averse because you don’t want to see the wealth you’ve worked so hard for disappear—and honestly, who does? Perhaps you or someone you’re close to lost a lot during the financial crisis of 2008. These devastating losses forced hardworking families into foreclosure and wiped out percentages of decades-old retirement accounts.

So if you’re risk-averse, we understand you. We don’t want you to lose your money either. This is why we believe that your financial plan should be built according to your needs and goals, but also according to your comfort level. 

Understanding Risk Aversion

Keeping money in liquid cash accounts may provide short-term feelings of security, but these short-term feelings can cause more anxiety down the road. If your investments stagnate during your working years, you may not have the retirement income you need to live comfortably once you stop working. 

It’s true that highly risk-averse individuals simply won’t see the returns that more moderate investors can expect. However, risk-averse investors shouldn’t be forced into investments they’re uncomfortable with.

If volatile markets cause significant anxiety for you, it might help to think about losses and gains as only happening on paper. Market changes don’t typically translate to real losses when you plan to access and use the cash over a long period of time through your retirement. Markets always bounce back, so diversified portfolios will usually return to the levels they were at prior to the loss, often continuing to grow as time goes on.

Risk-Averse Planning

Asset maximization is a good option for risk-averse investors. Building a portfolio that is properly diversified according to your needs and goals can address your risk tolerance while also encouraging growth. Essentially, you can assign funds to different asset classes, such as stocks, bonds, mutual funds, and more according to your risk tolerance.

For example, more risk-averse investors may prioritize investments such as government securities, low-cost mutual funds, and municipal bonds. Although these types of investments offer lower rates of returns than investments such as individual stocks or hedge funds, they are much safer. A well-diversified portfolio mitigates the temporary losses a certain class of assets may be experiencing.

With this approach, you can look at how your portfolio is performing as a whole instead of analyzing how each component is performing individually. 

We’ll Help You Create A Financial Plan You’re Comfortable With

At American Retirement Advisors, Inc., we help you balance your financial goals against your risk tolerance. We will educate you on market fluctuations and reassure you when guaranteed market corrections happen, always focusing on the returns of your portfolio as a whole. Call us at (855) 756-5700 or email to set up a complimentary introductory appointment.  

And if you’re not ready to partner just yet, take our free risk analysis to assess your current financial picture.

About Joe

Joe Vitale is president and independent advisor representative at American Retirement Advisors, Inc. With over 30 years of experience in the financial industry, Joe specializes in wealth preservation and distribution, helping his clients protect their hard-earned money from market downturns and the cost of long-term care. As a fiduciary, Joe cares deeply about putting his clients first and serving their best interests. Joe resides in Lapeer County, where he is involved with and supports numerous local and national charities. He enjoys spending time with his friends and family, including his 5 daughters and 2 grandchildren. In his spare time you can find him relaxing in the country with his family or trying to better his golf game, which needs some help! To learn more about Joe, connect with him on LinkedIn.