First Friday Focus – Men & Money

The Man’s Role – Some things are changing, and some are not.

The days of I Love Lucy when the men went to work and the women stayed home and received an allowance are gone. Today, it is more of a joint effort, roles are more equal with men taking on more responsibilities at home as well as women working outside the home and taking a greater role in financial matters.

What hasn’t changed is the instinctive nature. Men tend to have more of an invincible mindset which is carried over, sometimes unconsciously into financial planning and investing.

The Battle of Risk and Return – How to Take the Right Risks

Two Types of Risk

First, it is important to note the different types of investment risk; principal risk and volatility (or liquidity) risk.

Principle risk like is gambling, you can take a win big or lose it all. When it comes to investing, principle risk is more prevalent when you do not have proper diversification. Even if you have a colorful chart of different funds, that doesn’t mean you are diversified as they may hold the same stocks.

Volatility risk is also called liquidity risk because it has more to do with when you need funds in any given cycle.

Components of Risk Management

There are two components of risk management. One, how likely you are to hit your objective with the risk you are taking, this could be known as risk capacity. Two is the effect on the people involved, which is at the core, risk tolerance.

The emotional effects of risk should not be overlooked. I highlight that in the story about the Whites in the first chapter of our book, Creating Your Dream Retirement. (check it out here)

Risk management takes on many different forms, including using the Colors of Money (also in our book), proper diversification, hedging strategies, and more.

It is interesting to note when under pressure, men tend to increase risk while women tend to decrease risk.

In a market like we are in, pressure is high so it is important to have risk management parameters in place.

The Playbook – It’s not just for football players, why do you need one too.

Your investment management team and advisor should help you develop a playbook for whatever life situation you face. For example, retiring and needing income calls for a different playbook than saving for retirement. Having a playbook protects you from making bad decisions when under pressure. Check out these past videos for more on the playbook of our money management team –

Retirement Shift

State of the Union 2023

This should also dictate whether you make changes or not. Your portfolio managers should be making decisions on what to do based on the economy and financial environment. If they are not, then what needs to be done (if anything) first starts with on what is important to you, and what do you need.

Questions –

Is now the right time to make a change?

Maybe yes and maybe no. It depends on what you have and what you want/need right now. But staying put because “you’re in it for the long haul” may not be best either. This is case by case and a conversation and review of what you have is the first step.

What rate of return should I expect?

Over the long term, 10% on stocks and 3-6% on bonds is realistic, however, the more important question here is what is your time frame? If you are needing retirement income then while those long-term numbers may still be true, you are not looking as long-term and need to have your account managed based on your needs.


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