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The Greatest Risk of All
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The greatest investment risk you face isn't the often stomach churning ups and downs of the stock market, or missing out on the next hot stock. It's the risk of not meeting your investment goal.
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A lot of investors don't understand that. Instead, they're focused too much on trying to make as much money as they can, avoid losses, or pick the next hot stock. This strategy often results in adding too much or too little risk into a portfolio, which can derail even the best–laid plans. What you should be doing is investing toward a specific goal–such as retirement, buying a house, or funding a child's college education. You should never assume any more risk than is needed to meet that goal.
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Investing it a little like driving in a NASCAR race. The objective is to cross the finish line in first place. At first glance you would think that the best way to win is to go around the track as fast as you can. That's usually not the case. The winner is often the one who only took on as much risk as needed to win. More often than not, the most aggressive or the fastest drivers end up wrecking.
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Now we're not saying that you should be satisfied with below-average performances from your investments, or that you need to take on more risk than you're comfortable with. But don't lose sight of the fact that your primary goal should be to meet your future financial needs. Once those are met, everything else is icing on the cake.
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