3 Quick Tips for Reducing Investment Risk

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Recently Kevin Price, Host of the nationally syndicated Price of Business Show, welcomed David Lewis to provide another commentary in a series.

The David Lewis Commentaries

Taking on too much investment risk is great way to lose a lot of money. Yet, people do it all the time, especially in their retirement accounts. We don’t usually think of retirement accounts as risky. It’s a retirement account, after all. But, I can’t tell you how many times I’ve seen IRAs and 401(k) plans stuffed to the gills with speculative equity-based mutual funds. Any way you slice it, those things are risky. Here’s how to reduce your investment risk while still making long-term plans for your future:


1) Buy guaranteed investments. Investors have come to associate “guaranteed” with “low return”. That was true just a few years ago, but guaranteed investments tend to pay a lot more these days now that interest rates are trending higher. Today’s rates are more in line with historical norms, too. It just feels like they’re “high” because we’ve been living in a low interest rate environment for so long. But in the old days, buying some guaranteed investments was a surefire way to reduce investment risk.


2)  Don’t invest more than you can afford to lose. Financial planners love to talk about “risk tolerance”, which is nothing more than how you feel about risk. Feelings often have very little to do with reality though. You might feel ready for a rollercoaster ride, but once you’re strapped into the seat and hit that first drop, you’ll probably feel differently about it. But by then, it’s too late. Investing based on your objective risk capacity tells you more about what risks it’s safe to take, and when.


3) Avoid catastrophic losses. Easier said than done, right? There’s a trick to this that few investors and financial advisors talk about. Most investors get hyper-focused on the probability of something bad happening, while ignoring another (often far more important) part of the equation. I discuss exactly what investors are missing in this month’s commentary and how you can take advantage of it right now to reduce your investment risk.


David has been a licensed life insurance agent since 2004. In addition to life insurance design and sales, he has also helped develop educational and marketing content for large financial firms like Allstate, New York Life, State Farm, AmTrust, and J.G. Wentworth. His articles and essays on life insurance and Human Life Value are currently taught at California State University (CSU) as part of its Expository Writing and Reading Course, and his articles on budgeting, life insurance, investing, and financial planning have been featured in online publications like ThinkAdvisorThe Huffington PostNuWire Investor, and RealClearMarkets. David is also the author of several short eBooks on budgeting and saving money, and the designer of the xFlow™ budgeting app and the xCalc™ suite of financial calculators.

Visit www.monegenix.com to learn more.

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