Page 29 - Southern Exposure - January '22
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Southern Exposure, Page 29

                                                               FinanCial FoCus

                 What Should You Know About Investment Risk?

                                                                        By Sally Sima Stahl

        When you invest, you incur risk – there’s no avoiding   of years, and even decades, you can reduce the likelihood   your money into other types
      it. But the concept of “risk” may be more expansive than   of sustaining losses that could send your investments’   of investments. Consider
      you realized. And by understanding the different types of   value to zero. Hopefully, the value of your investments   bonds, for example. When
      investment risk and how these risks can be addressed, you   will rise over time. And it’s worth noting that, since the   you purchase a bond, you
      can improve your skills as an investor.            Great Depression, U.S. stocks have averaged 9.59%   typically receive regular
        The most common perception of investment risk is   annual returns, according to Morningstar Direct, an   interest payments and
      simply the  risk  of losing  money. When  you  invest in   investment research service. However, past performance   you get back your initial
      stocks and stock-based vehicles, such as mutual funds,   can’t guarantee future results.             investment when the bond
      there are no guarantees that your principal – your initial     In any case, this type of risk is real, and it’s a factor   matures, provided the
      investment amount – will be preserved. Generally   to consider when making your investment decisions. But   issuer doesn’t default. But
      speaking, if you hold stocks or mutual funds over a period   you can’t avoid all risk by avoiding stocks and putting   if interest  rates  go up  and
                                                                                                           you want to sell your bond
                                                                                                           before it matures, you’ll have to offer it at a “discount,”
                                                                                                           because no one will pay the full price for your bond when
                                                                                                           they can buy new ones at a higher rate.
                                                                                                             You can help manage this type of interest rate risk
                                                                                                           by owning a variety of bonds with different maturities.
                                                                                                           When interest rates are rising, you can reinvest your short-
                                                                                                           term bonds at the new, higher rates. And in a falling-rate
                                                                                                           environment, you can still benefit from your longer-term
                                                                                                           bonds, which typically pay higher interest rates.
                                                                                                             Foreign or international investments also contain
                                                                                                           specific risks. When you purchase foreign stocks, you’ll
                                                                                                           find that fluctuations in the value of currencies relative to
                                                                                                           the U.S. dollar can affect your returns. Also, international
                                                                                                           investments may carry political risk, since some foreign
                                                                                                           governments and political systems may change in ways
                                                                                                           that work against businesses in those countries. To contain
                                                                                                           these types of risk, you’ll want to maintain an appropriate
                                                                                                           allocation of international holdings and diversify across
                                                                                                             Ultimately, your most broad-based defense against all
                                                                                                           types of risk is to build a diversified portfolio containing
                                                                                                           U.S. stocks, international stocks, corporate bonds, mutual
                                                                                                           funds, government securities and other investments.
                                                                                                           Diversification works because it helps reduce the impact
                                                                                                           that market volatility can have on your portfolio if you only
                                                                                                           own one type of asset, such as domestic stocks. (However,
                                                                                                           diversification can’t guarantee profits or protect against all
                                                                                                           losses.) And you’ll also want your portfolio to reflect your
                                                                                                           individual tolerance for risk.
                                                                                                             By being aware of the different types of risk, and taking
                                                                                                           steps to mitigate them, you can create a strategy that offers
                                                                                                           the potential to help you achieve your important goals,
                                                                                                           such as a comfortable retirement. And by doing so, you’ll
                                                                                                           avoid the greatest risk of all: not investing for your future.
                                                                                                             This article was written by Edward Jones for use by
                                                                                                           your local Edward Jones Financial Advisor, Edward Jones,
                                                                                                           Member SIPC.
                                                                                                             Edward Jones is a licensed insurance producer in
                                                                                                           all states and Washington, D.C., through Edward D.
                                                                                                           Jones & Co., L.P., and in California, New Mexico and
                                                                                                           Massachusetts through Edward Jones Insurance Agency
                                                                                                           of California, L.L.C.; Edward Jones Insurance Agency of
                                                                                                           New Mexico, L.L.C.; and Edward Jones Insurance Agency
                                                                                                           of Massachusetts, L.L.C.
                                                                                                             Edward Jones, its employees and financial advisors
                                                                                                           cannot provide tax advice. You should consult your
                                                                                                           qualified tax advisor regarding your situation.
                                                                                                             Contact us at (561) 748-7600, Sally Sima Stahl, AAMS,
                                                                                                           1851 W. Indiantown Road, Ste. 106, Jupiter, FL 33458.
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