Most Minnesota stock market investors place too much emphasis on investment returns. This is especially true as the calendar rolls from one year to another.
Investment returns are the reason to invest in the stock market. The stock market provides an annual opportunity to grow their assets at a much higher rate than inflation.
It has to be equally important to preserve those investment returns when you have them. As the old investment adage states, “It is not what you make that counts. It is what you keep.”
Investment management professionals focus their daily attention on managing investment risk and preserving investment gains. These professionals realize that investment returns are largely unpredictable and outside their control.
The stock and bond markets are full of uncertainty now. No one knows when the new all-time stock market highs might end. No one knows when the near all-time interest rates will rise.
You can’t ever predict investment returns. You can manage how much investment risk you take to get your investment returns.
Most individual investors rode along with the 2013 stock market to record high investment account levels. These same investors run the risk of falling into the same investment management trap again. That trap is not having a game plan to manage the risk of a falling stock market and rising interest rates.
Flood insurance is always more expensive after a flood. Your car insurance rates always go up after you have had a car accident. Think about how these two events relate to your current stock and bond market investments.
It is extremely difficult to recover your principal after a major stock or bond market decline. The time to put in place an investment risk management plan is before the stock market falls and interest rates rise.
Ric Lager
Lager & Company, Inc.
