If you are an expert, then you probably have been investing in the stock market for 10 years or more, and your 10-year portfolio return should be around 100%. As your portfolio grows, the key issue for you is how to beat your benchmark, and better manage your risk exposure. When is the next ‘bear’ coming?
Risk is not about volatility. When you invest in the long term, you don’t really care about the daily ups and downs of share prices. You only care about something bad and unexpected happening. And this is what risk is really about: for most people, ‘risk’ means a financial loss. And clever investors are loss-averse, not risk-averse.
There are mostly two bad things that can happen to your portfolio:
- a market crash in the short-to-medium term. If that happens, and if you remain invested, you might torment yourself for 18-24 months, while watching the value of your portfolio going down with apparently no end to it.Even if you don’t remain invested, you might be tormented by exiting the market too late, missing the bottom, and coming back into the game too late as well. For all sorts of reasons, it’s extremely difficult to time the market correctly. The risk here is that you make big mistakes – e.g. selling low – and never manage to re-enter. That’s a sure recipe for losing big! And that’s why for most people, remaining invested through a market crash might be the best approach, as you can still win big by remaining invested.
- in the long term, the risk is about not meeting your personal expectations. If you invest with a 10-year investment horizon, and have an expectation of 100% return, to be achieved with a particular portfolio, then the question is how likely it is that your portfolio will achieve / not achieve your goal?
This is where a ‘Platinum’ membership on the MyMoneyWorks platform can help. In addition to the services available to ‘Discovery’ and ‘Premium’ users, ‘Platinum’ members have exclusive access to the following functionality:
- Simulate the future evolution of their portfolio, and visualise the potential outcomes
- Receive personalised portfolio alerts, based on criteria (and frequency) defined by you
- Interact with ‘back belt’ experts, who manage a large personal portfolio and have more than 20 years of experience in investing.
Get started today and become a MyMoneyWorks member. The Discovery membership is free of charge and will always remain free.