Investment risk is always present, but during COVID-19, the stock market has experienced so much volatility that investors are beginning to wonder where to invest. Investors must consider how investment risk can decline their portfolio’s value due to economic events that impact the entire stock market.
The primary investment risks to a portfolio are equity risk, interest rate risk, and currency risk, which is when investors choose to invest in other countries with stable interest rates and currencies and not their own country’s offerings. This risk creates a loss of economic confidence for domestic investors who choose not to invest in their local economy.
Investors should take the time to investigate the U.S. company stocks in their portfolio to determine how they pay out dividends, and if the payout is reliable during this period. Other considerations investors must address to offset investment risk:
Investors must remember that with more risk comes more reward and that the lowest risk market-related investments are the ones that also produce the lowest yields. Additionally, remember that no investment is without risk.
During COVID-19, it is essential to continue to work with your financial professional to determine a strategy that fits your risk profile outside of this period. With unemployment high and the economy down, volatility will continue as investment risk for certain types of investments progresses. Remember that letting your money sit idle during this period may mean missed opportunities for your portfolio.
One solution to addressing investment risk as well as inflation risk and tax risk is by increasing the allocation of principal-protected products. The benefits of fixed-indexed annuity products address these significant dangers to a retirement portfolio:
Inflation Risk- Allocation to certain products allow asset allocation strategies to address inflation.
Taxes Risk- Leveraging tax-free investment strategies increases investment capital.
Longevity Risk- Utilizing “income for life” features address longevity risk and long-term care risk.
Survivorship Risk- “Death Benefits” provide tax-advantaged mitigant against untimely death.
Market Risk- Principal protection provides a buffer against stock market fluctuations.
If you have questions about investment risk or any of these additional risks, now is a great time to meet. We can review your retirement portfolio to ensure your retirement plan is on track.
Guarantees are backed by the financial strength and claims paying ability of the issuing company. This article is designed to provide general information on the subjects covered. Pursuant to IRS Circular 230, it is not intended to provide specific legal or tax advice and cannot be used to avoid penalties or to promote, market, or recommend any tax plan or arrangement. You are encouraged to consult your personal tax advisor or attorney.
In addition Prestige Financial Advisors specializes in providing strategies and guidance for those who are seeking a better lifestyle in retirement. If you have retirement savings of five million dollars or $50,000, we can ensure it works as hard. As a result, we offer our experience and knowledge to help you design a custom strategy for financial independence. Contact us today to schedule an introductory meeting!