Good morning!
Hope you had a wonderful 4th of July weekend.
Let's play Match Game...
No, not that Match Game.
I'm talking about matching the concept of risk with things other than investment returns.
You've probably heard the concept of "risk vs return" over the years.
And while risk and return are related, they're not in an "exclusive" relationship.
In fact, I like to think in terms of risk vs:
retirement age
retirement spending
educating your children or grandchildren
leaving a legacy
charitable giving
a 2nd home at the beach
or virtually anything else that's important to you and has a financial component
You see, while most advisors and the financial media, including the Jim Cramers of the world, focus solely on returns and the risks associated with achieving those returns, here's the thing...
You can't spend your investment returns at the grocery store.
And you sure can't eat returns at the dinner table.
Returns get all the focus and attention in financial advice and investing circles while ignoring what's really important:
What's the money for?
Asking, and ultimately answering, this all-important question provides an opportunity to "match" risk with your goals.
With your aspirations.
You're not investing simply to get a return.
You're investing - and exposing your hard-earned capital to risk in the investment markets - in order to outpace inflation over time and pay for your lifestyle (net of taxes) for the rest of your days.
At least that's MY perspective.
So next time you find yourself focused on the age-old "risk vs return" quandary, I'd instead encourage you to think about what you want to eventually do with the money - whether that's 5 or 25 years from now.
Also, "risk vs return" doesn't do justice to your unique and wonderful life.
It grossly oversimplifies things and focuses just on your money.
But you're more than your money, right?
Money is nothing more that a tool for living your life.
And it's your life and making the most of it that's the focus of my financial planning work. I'd suggest it be your focus as well.
Thoughts?
Hit reply and let me hear what you think about risk vs ???
Links & things
As I've shared in the past, I have mixed feelings around the entire concept of retirement (in the traditional sense). However, I contributed to this recent MSN article on early retirement which you can check out here:
One of the most contested parts of divorce is the house. Who's staying, who's leaving, or if we sell, who gets what? With this in mind, I decided to share some thoughts in my latest blog post:
Speaking of your home, I've had several conversations lately with many of you about the buy vs rent decision. And while Elizabeth and I own two homes, I think there are distinct benefits to renting in certain situations. Besides, while many of us are watching our home values skyrocket on Zillow, when you consider ALL the costs associated with home ownership your "return" might not be as great as you think. More on this idea in this recent article:
Thank you, as always, for reading.
And if you have any questions or an idea for a future newsletter, blog post, or YouTube video, I'd love your input.
Just hit reply - I read (and appreciate) every email you send.
Until next Wednesday,
Russ