Tag Archives: risk

Financial Perspective: Are you comfortable with risk you are taking?

March 29, 20223-bottom, Finances, Local Business, Our Cities, Senior LivingDave Stanley, Finances, Integrity Financial Service, Money, risk, understandingJoanne

By Dave Stanley
Integrity Financial Service, LLC

“Risk can be a hard concept to calculate, remember, it is not a calculated risk if you haven’t calculated it.” – Dave Stanley

In the 2009-2010 NFC Championship Game, the Minnesota Vikings and the New Orleans Saints were tied 28-28 late in the fourth quarter, with the Vikings close to field goal range. Vikings quarterback Brett Favre took the snap, rolled to his right, and saw about 30 yards of open field in front of him. Even though he had injured his leg in the third quarter, all Favre had to do was lurch forward for 10 yards, fall down, and have a first-and-10 inside field goal range.

Instead, Favre reverted to what has made him a legendary hero (and sometimes a goat) many times in his Hall of Fame career. He planted his foot and threw cross-field where Tracy Porter intercepted him at the 22-yard line. At that moment, Minnesota’s fine season, Favre’s great comeback, and Vikings fans’ hope for a Super Bowl were thrown away. The Saints ran out the clock and kicked a field goal on the first possession of overtime.

What happened? In a pressure situation, with everything on the line, instead of making the high percentage play, a superstar did what felt familiar and comfortable – not what was safe.

You see the analogy coming. Quarterbacking a football team and managing your retirement portfolio are wildly different activities. It is doubtful that we will ever achieve a “Brett Favre” status within your success. Yet, a failure on our part to “read the field” could be more devastating to a family than the shock and disappointment felt by the players, coaches, and fans after that heart-breaking loss.

It is common for us as individuals to be the “quarterback.” If that’s the picture we are projecting, who is the head coach and team owner? Making all of the decisions in your planning can be very difficult, but help is often needed.

We have moments when we cannot handle any more risk (take the first down!). We know we do not want to lose another dime (just get me into a good field position!). It does not make any difference if you are convinced you can choose the stocks, funds, IPO’s, REITs, or whatever will right their portfolio and make you look like a hero. Most of us may not be ready to take that step with you.

During that game, there were millions of people watching. Some of those people were former NFL players. Some were Hall of Famers. Some were even Hall of Fame quarterbacks. But, when Favre planted his foot, there was no one on the planet more comfortable than he was. A lifetime of training, conditioning, practice, big games – even Super Bowls, had prepared him for that throw. It was the most comfortable thing in the world until Tracy Porter.

We may have the knowledge and experience but being all things in all situations just isn’t possible any longer. We all need a “Coach” to make sure we call the correct play. The disappointment over a lost opportunity while “going for field position” will be nothing compared to the fury if you try to “force a throw” they did not want you to make in the first place.

In plain English, we should never be comfortable with risk unless we know and understand all your options.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or Register for Dave’s FREE Newsletter at 888-998-3463 or click this link: Dave Stanley Newsletter – Annuity.com Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management.

Financial Perspective: Do you want green sauce or red sauce with that?

March 15, 20223-bottom, Finances, Local Business, Our Cities, Senior LivingDave Stanley, Integrity Financial Service, Money, riskJoanne

By Dave Stanley
Integrity Financial Service, LLC

“If you are within a couple of years of retirement, you will want to know the answer to this critical question.”- Dave Stanley

Here in New Mexico, it isn’t unusual for someone ordering Mexican food to be asked, “Red or green?” In fact, “Red or green?” was adopted as the official state question in 1999. (Did you even know such a state question existed?) Chile is the fiery soul of New Mexican food, and everyone here has their opinion about which chile sauce goes best with which dish.

I like to ask my clients and prospects the same question regarding their retirement savings. “Do you prefer green money or red money?” Red money, I define as that portion of savings a person is willing to expose to market risk. With red money, you accept the possibility of losses, even significant ones. The desire to chase after market gains is perfectly understandable given our current low-interest environment that punishes savers. Nevertheless, risking your life savings in hopes of getting (often mythical) higher returns may not be the ideal decision for those who are within a few years of retiring. That’s because when you choose red money, your wealth is exposed to both upside and downside risk.

On the other hand, green money is the portion of your savings you want to safeguard. Green money is cash used to create income streams that provide you with more safety and peace of mind. Green money is for those who are unwilling to accept even small losses. Instead, green money people add products offering lower rates of return in exchange for low to no market risk. Real green money has no downside risk and only upside potential.

Choosing red or green is not black and white. Despite what you may have heard from your advisor or some TV money guru, neither red money nor green money is inherently bad or good. After all, you are an individual with your own level of risk tolerance and unique money goals. What you need your savings to do when you retire may be very different than what your friend, neighbor, or co-worker needs.

Knowing this, you shouldn’t be asking, “What’s better, red or green money?” but rather, “What percentages of each type should I have in my portfolio to achieve my goals?” “What portion of my cash am I comfortable with exposing to risk?” “What do I ultimately want this money to do for me?” If you’re wanting to move forward slowly and consistently, instead of getting caught in a cycle of two steps forward, three steps back, you’ll need to examine products that can help you accomplish that.

For example, certain types of life insurance and annuities offer you the possibility of creating predictable retirement income with little to no risk exposure. Exploring your safe money options is not only prudent but necessary as we continue to experience market upheavals and a precarious and unpredictable economy.

Summing it up: A successful retirement requires that you know with what percentage of risk you are most comfortable with, how much you can afford to lose during a market downturn, and what you want your wealth to accomplish. How much red or green money you put into your portfolio is a critical decision that every retiree needs to make. A seasoned retirement income planner can assist you in making that decision and ensuring that every one of your dollars does the work of three or four.

Misperceptions about market corrections: Are you prepared?

October 2, 20173-bottom, Citizen Journalism, How-To'sBerkshire Hathaway, financial market, Grand Wealth Management, Jeffrey S. Williams, Money, portfolio, risk, stock market, Warren Buffet, wealth managementJoanne

By Jeffrey S. Williams, Grand Wealth Management

In his most recent Berkshire Hathaway shareholder letter, Warren Buffett shared this powerful insight about market downturns:

“During such scary periods, you should never forget two things: First, widespread fear is your friend as an investor, because it serves up bargain purchases. Second, personal fear is your enemy.”

This is a good time to talk about scary markets, since we haven’t experienced a severe one in a while.

Scanning financial news in our calm market, you’ll find the usual range of attempted interpretation about our current market: “We are worried about …” “Economic indicators suggest that …” “Geopolitical events are likely to …” and so on.

While it’s highly unlikely the market will remain this calm forever, nobody can predict when it might turn, or why or how dramatically it may spike back up when it does. We counsel against shifting your portfolio in reaction to near-term forecasts. Instead, let’s use the relative calm as a perfect time to do a reality check on what scary markets really represent, and how to manage them when they occur.

Contrary to common perception, scary markets can be your friend. Instead of fussing over when the next market downturn may or may not occur, here are some great questions to consider:

Are you taking on enough stock market risk in your portfolio to capture a measure of expected returns when they occur?
Are you fortifying your exposure to market risks and expected returns with enough lower-risk holdings, so you won’t fall prey to your fears the next time markets tumble?
Have you assessed whether your current portfolio mix is optimized to achieve your personal goals and have those goals changed?
Does your current portfolio mix of safer/riskier holdings accurately reflect what you’ve learned from past markets?
Have you carefully considered what a 30% or so market downturn would mean to you in real dollars and cents?

You can prepare for the next down market by having a well-planned portfolio in place today — one you can stick with through thick and thin. Neither too “hot” nor too “cold”, your portfolio should be just right for you. It should reflect your financial goals. It should be structured to capture an appropriate measure of expected returns during good times, and allow you to effectively manage your personal fears throughout.