Risk Versus Return

My son, Carter, is a pretty typical 12-year-old boy. He is fascinated by weaponry (which at this age for him includes airsoft guns, paintball guns, a bow and arrow and a collection of pocket knives); loves to watch war movies (he’s a history buff); plays too many video games (he can sit mesmerized for much longer than I prefer); plays drums in the band (which also means tap, tap, tapping on every flat surface he comes across), loves basketball (playing more than watching) and doesn’t clean up after himself until reminded…several times.  


There is one way, though, that Carter may be a little atypical – he’s cautious.   He is not a rash decision maker, and he usually thinks before he leaps.  He takes plenty of leaps, but each one has been given careful consideration.  And as a mom who probably (ok, definitely) worries too much, Carter’s cautious nature gives me a little added peace of mind at times.


We are by nature – and choice – cautious at ICM.   We are fiduciaries.  We are responsible for the life savings of our clients. It would be reckless of us to throw caution to the wind in a relentless pursuit of returns.  Are returns important?  Of course.  But the amount of risk taken in a portfolio is no less important.  If you’re in the accumulation phase of life (working) and aren’t taking enough risk, then you may be hurting yourself.  If you are in the income phase (retired) and are taking too much risk, then you could be hurting yourself in a big way – think 2008. 


Retirement income planning is where the rubber meets the road.  It isn’t rocket science, but it can be complicated, and it has a lot of moving parts beyond a portfolio – Social Security, taxes, estate planning, Medicare. If you’re working with a financial advisor who isn’t able to provide valuable insight into all areas affecting your retirement, then you need to find another advisor.  Read more about return versus income here http://www.marketwatch.com/story/want-to-retire-stop-chasing-returns-2013-06-11.


Our philosophy is to achieve the greatest return possible with the least amount of risk, and finding the right balance is ongoing.  As the global economy changes, so must our strategies and investment choices.  No matter how redundant it may sound, diversification is still key to long-term success, and it is of particular importance when you are relying on a portfolio to generate a viable and lasting income in retirement.  Sure, it may make you feel giddy to see the Dow soar, but if the success of the U.S. market is centric to your portfolio, then you may find yourself going from giddy to green in a hurry.


Just as I relax a little knowing that my son is not going to jump out of the raft on river rapids at summer camp this week, our clients can relax knowing that we are keeping their investments out of the rapids of market volatility. 




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Comment   |  6 years, 8 months ago from Kingsport, TN