The first time I stood at the top of the high dive at the rec center pool, I was a nervous wreck.
I never realized how afraid of heights I was until that moment.
For many that have never invested before, they feel this same apprehensive feeling.
With the rising cost of living, it’s imperative that we invest (preferably with the lowest risk possible) to generate high yield returns.
High rates of return on your investments are wonderful because it means you don’t have to invest as much capital to reach your investing goals. Yet the higher return you want the more risk you take to get that return.
As you near or enter retirement (or if you are managing investments for your high school senior’s college fund) your appetite for risk drops precipitously. You simply cannot afford to see a huge drop in the market right before the time you need to begin withdrawing funds from the investment accounts.
Instead, you need to shift to low risk investments. These types of investments will generate a lower return because you aren’t taking as much risk, but you’re okay with that. At this time capital preservation is more important that astronomical growth rates. You need to know your account won’t drop 25% in a year and severely impact your investing goals.