With the recent strong positive trend in stocks and risk assets since April 2020, I have been thinking quite a bit about a couple risks that face retail investors and which have become more and more relevant now that I get a bit of vertigo from the S&P 500.
These risks are 1) the risk of us not reaching our financial goals by not managing our investment risk properly and 2) abandoning a safer strategy when we see others making more money with high-risk strategies.
I will discuss these risks more in details below and why they matter, and in particular why it is more urgent for retail investors to have understood these risks.
Namely, apart from institutions with more or less infinite investment horizons, we as retail investors are only active on the financial markets for a quite brief moment when you zoom out and consider all the history of investing.
And as we only get one shot at it (no do-overs), it is important that we get it right from the start. It is crucial to avoid making a mess of our investing careers that we cannot repair later.
I hope you find this text useful, and please share your thoughts in the comments or directly by email to email@example.com.
And as usual, the regular update of my All Seasons Portfolio(s) follows right after the month's special topic. July was a quite good month for me, and I have made a slight alteration of my portfolio, switching the TIPS ETF from a global one to one with longer-term US inflation-linked bonds.
But more of that to come. Now, let's have a look at a different way of defining "risk".