As an investor, you will always need to deal with risk of some kind. How can you manage the risk that accompanies the volatility of the financial markets? The answer depends somewhat on where you are in life.
When you’re starting out … If you’re early in your career, with perhaps four or five decades until you retire, you can likely afford to invest primarily for growth, which also means you’ll be taking on a higher level of risk – because risk and reward are positively correlated. But, given your age, you will have time to overcome the market downturns that are both inevitable and a normal part of investing. Still, even at this stage, being over-aggressive can be costly.
When you’re in the “middle stages” … At this time of your life, you’re possibly well along in your career and working on at least a couple of financial goals, such as saving for retirement and your children’s college education. You’ll want to begin adjusting the balance in your portfolio between assets with higher growth and those with lower growth since there will be progressively less time to rebuild losses. You’ll need to decide on the balance between risk and growth that’s right for you.
