2016-To Dare, or Not?
As we look to the future as often we do this time of year, investors ask the question of what’s in store for financial markets.
→ Will 2016 be a prosperous year characterized by economic growth and rewarding investment returns? Or, are the losses from the first several days a sign of what’s to come for financial markets in 2016?
At the core of this dilemma is the nature of risk. Risk is the reality that many more things can happen than will happen. What we are really saying is that the future is uncertain. These unforeseen outcomes could be good things, or, they could be bad. Of course it doesn’t bother us when we have positive surprises, it’s the negative ones that really impact us. In today’s age of self-directed retirement planning, missteps can be quite costly.
As I was going through year-end cleanup in my office as many of us do, I came across an interview I have saved with the late financial historian Peter Bernstein. In the interview (fittingly titled “Too Much Math in the Subprime Crisis”), Mr. Bernstein discusses the origins of risk as we understand its applications in modern finance. The term risk comes from an Italian word risicare, which fittingly enough means ‘to dare’. By this assessment, risk is more of a choice rather than a fate. Blaise Pascal (1623-1662) discovered the law of probability and used it in decision making with games of chance (as well as the biggest decision in life). Pascal’s advice? Consider both probabilities and consequences when making decisions. In other words, you need to ask yourself “what happens if I’m wrong?”
May I suggest a resolution for this New Year? Take time to understand the risks of your investment strategy and how these risks may impact your retirement goals. ⬥
Investment advisory services provided by Forward Wealth Management, LLC. Past performance may not be indicative of future results. All investing involves risk, including the potential for loss of principal. There is no guarantee that any investment plan or strategy will be successful.