Playing from the Tips

Risk and Return: Understanding the Investor’s Balance

Golf is a challenging sport. Not only is

a player required to assess their own weaknesses and hopefully create plans to strengthen them, but outside forces like weather, course conditions and even aerodynamics can affect a player’s game. As a result, golf requires a level of patience, practice, and adaptability that mirrors the best traits that investors have: steady nerves, long-term goals, and the ability to adjust as conditions change. There is always risk when participating in tricky endeavors such as golf and investing. Every golfer knows that a game can tumble from an enjoyable afternoon to a teeth-grinding slog with one long iron shot into the wind or a poorly placed shot on a tree-lined fairway. And every investor knows the heart-stopping feeling when the volatility of the markets makes you question every investment chosen. But the risk is what makes each rewarding- golf wouldn’t have its draw if there weren’t challenges, and investing wouldn’t have its possible monetary gains if it was a sure thing. Investments like stocks, bonds, and mutual funds have historically had 7% -10% annual gains. Of course, that type of increase isn’t guaranteed, but investing’s riskiness is why there are potential rewards that outweigh FDIC insured accounts such as savings and high-yield savings accounts. To mitigate risk within investing, you need to understand your risk tolerance. Risk tolerance is the amount of risk you are willing to withstand and how well you will handle losses. Your risk tolerance can alter as your goals change, income changes, family changes, assets accumulate, and as you age. Though risk tolerance can’t wholly shelter you from loss when used in conjunction with diversification and investing with well-researched products, it can help protect your money. Investing to reach your financial goals will also be affected by factors like amount invested, length of time invested, rate of return or growth, fees, taxes, and inflation. Understanding what you are investing your money in is essential even when working with a financial planner. Financial planners are trained to help you change your portfolio as your risk tolerance changes, research investment products and understand market trends, and help guide you at every stage of your financial life. Any financial planner that you work with should be very transparent about how your money is invested and how fees are taken. Find a planner that spends the time to help you understand your portfolio, risk tolerance, and goals. If you would like a review of your current portfolio, don’t hesitate to contact me at 800-871-1219 or email fsykes@ scarletoakfs.com. Advisory services offered through Capital Asset Advisory Services, LLC, a Registered Investment Advisor.

Sources https://www.bankrate.com/glossary/r/risk-tolerance/ https://www.investor.gov/sites/investorgov/files/2019-02/Savingand-Investing.pdf