Day 7 of 40 Days to Make Your Money Count

Risk Early, Not Late "The time to relax is -- when you don't have time for it." - Sydney J. Harris Some people who come to see me are in their 50s, and they are desperate to make as much money in a few years before they hope to retire. They want me to put their money into high risk, and hopefully high yield, investments. A better way to look at it is to realize that higher risks make sense only for the long haul. Historically, the market has trended up over long periods of time, but it reacts with alarming volatility in short time spans. A casual glance at a graph of the Dow, S&P, or NASDAQ indices demonstrates these facts. For that reason, financial planning professionals generally recommend investments with lower risks for shorter time horizons, but if you can keep your money in place for a long time, you can ride out the ups and downs of the market and take advantage of higher risk instruments with higher returns. A young couple about 26 years old asked for my advice about investing their 403b. We talked about their goals and when they would need the money, and they agreed that they wouldn't need it until their children (yet unborn, and to their knowledge, unconceived) went to college. I recommended an aggressive growth mutual fund. A couple in their 50s had a different look in their eyes. Instead of curiosity and confidence, panic filled their faces and voices. "I need to make as much as I can as quickly as I can," the husband assured me. "We don't know what might happen," his wife agreed. I explained the principles of risks and time horizons, and reluctantly, they decided to invest in funds with less risk but greater stability. That proved to be a good choice because the market went down about the time she had major surgery and they needed to withdraw some of the funds. Choosing the lower risk investment saved them about $8000.

You can listen to Day 7 of 40 Days to Make Your Money Count online on Radio and Podcast. Open the player on this page to stream the available audio.

Day 7 of 40 Days to Make Your Money Count is an episode from Made in Texas by Jim Munchbach, Certified Financial Planner™.

This episode is 15:13 long.

This episode was published on Dec 13, 2018.

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