Financial Literacy 101: Investing Comes with Risks

In this Dennis the Menace comic, you see Dennis about the break a piggy bank with a hammer and the caption reads, “Sorry, Piggy…But investments come with risks.”  At his young age, Dennis understands that it is not all smooth sailing when you invest. In this case, he has found some reason to literally ‘break the bank.”  He is telling the piggy bank he is sorry but as many adults know, it is the investor who may actually feel some pain.

A MarketWatch Opinion column asks, “ How much investment risk should you take?” The subtitle that says. “ Your retirement investment are in it for the long haul” offers a clue. The article that follows offers a detailed look at the ups and down of investing over a 40 year period. Perhaps you do not completely understand all that is being said and cannot decipher the tables presented. That is okay. What you need to know is some basic principles of investing and to find a financial planner you can trust to help you work through any anxiety you may feel when things change. The article warns that some brokers and financial advisers may highlight only the upswings of a certain fund or investment and leave out information about any losses.  As the article notes, “…we cannot know what the future holds. All we can know is the past.”  But how you examine the past and how you apply the lessons learned makes all the difference.

Not only do you have to accept some risk, you need to accept responsibility for diversifying your investments. Again, the article goes into details that may seem complicated to some but you have to at least start with the basic idea that you need to look into putting your resources into more than one kind of investment. Knowing that means you won’t put all of your money into one funds. Yes, your investment will go through ups and downs over time and in this example, “…the evidence is clear that fixed-income investments mitigate those losses.”  

April is Financial Literacy Month and many of us don’t know as much about finance as we could. While you do not have to study as much as a professional like a Fee-Only financial planner, some basic knowledge of finance will help you figure out your goals and be useful when you work with a financial planner.


©Bring Clarity to Your Finances. Financial Literacy 101: Investing Comes with Risks is a post from Bring Clarity to Your Finances

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Claire Emory, MBA, CFA, CFP®

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