When the stock market is going up, you don’t see a lot of discussion about risk.
When it tanks, investors get very nervous about the risk they are taking.
“Risk” is a double-edged sword.
Without taking risk, you would have to be content with the puny returns of bonds issued by the U.S. Treasury, which are often called “risk free.”
When you invest in stocks, you take risk.
The more of your portfolio allocated to stocks, the more risk you are taking.
Think about it this way:
Taking risk is the price you pay for the higher expected returns of stocks over bonds.
If you have a time horizon of 5 years or more, you don’t need to be concerned about the daily twists and turns of the stock market.
If you have less than 5 years, you shouldn’t invest in stocks unless you are prepared for the value of your portfolio to decline by as much as 50% or more.
If you have a competent registered investment advisor, you are well positioned to withstand downturns in the market.
If you don’t, this is a good opportunity to look for one.