OCTOBER 2020 • LONGISLANDPRESS.COM 19
WHAT’S THE RISK?
When it comes to investing, many people associate
risk with losing money. But investing entails different
types of risk. Understanding each type – and the
potential return associated with your retirement
portfolio – can help you determine whether your
investments are appropriate for your situation.
Examining Risk and Return
Stocks historically have exhibited the highest level
of market risk – or the potential that an investment
may lose money in the short term. Over long periods
of time, however, stocks have outperformed both
bonds and cash investments.1 This risk/return
tradeoff may influence how you allocate your
investments. For instance, consider weighting assets
that you intend to keep invested for 10 years or more
toward stock investments.
Bonds carry their own risks – credit risk, or the
possibility that a bond issuer could default on interest
and principal payments; and interest rate risk, the
chance that rising interest rates could cause a bond’s
price to fall. Ascending interest rates historically have
influenced the prices of bonds more directly than the
prices of stocks.1 When short-term rates are on the
rise, investors may sell older bonds that pay a lower
rate of interest – causing their prices to fall – in favor
of newly issued bonds that pay higher interest rates.
On the plus side, bonds historically have exhibited
less short-term volatility that stocks, although past
performance is no guarantee of future results.
It’s also important to look at cash investments,
such as 3-month Treasury bills, from a vantage point
of risk and return.1 Although Treasury bills typically
experience a low level of volatility, they may be subject
to inflation risk – or the possibility that their returns
may not keep pace with the rising cost of goods and
services. For this reason, you may want to use cash
investments for short-term situations when you expect
to access your money within 12 months or less.
Putting Risk in Perspective
Because all investments entail risk, you may
want to review your mix of stocks, bonds, and cash
investments with an eye toward creating a risk/
return profile that is appropriate for your situation.
Owning different types of assets may increase your
chances of experiencing the benefits associated with
each, while mitigating the corresponding risk. Your
retirement portfolio won’t be risk free, but you will
have the confidence of knowing that you’ve done
Paul Celentano, Wealth Management Advisor/
what you can to manage a potential downside. This
article offers only an outline; it is not a definitive
guide to all possible consequences and implications
of any specific investment strategy. For this reason,
be sure to seek advice from knowledgeable financial
professionals. As always, if you have any questions
or would like further insight, don’t hesitate to reach
out via phone at 516-634-1301 or by email at paul.
Source/Disclaimer: 1Source: SS&C Technologies, Inc. For the 30-year period ended December 31, 2019. Stocks are represented by the Standard & Poor’s Composite Index of 500 Stocks, an unmanaged index that is
generally considered representative of the U.S. stock market. Investing in stocks involves risks, including loss of principal. Bonds are represented by the Bloomberg Barclays U.S. Aggregate Bond index. Bonds are subject
to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and are subject to availability and change in price. Cash is represented by the Bloomberg Barclays 3-Month Treasury
Bills index. It is not possible to invest directly in an index. Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest, and, if held to maturity, offer
a fixed rate of return and fixed principal value. Past performance is not a guarantee of future performance. All investing involves risk including loss of principal. No strategy assures success or protects against loss.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All Performance referenced is historical and is no guarantee
of future results. All indices are unmanaged and may not be invested into directly.
At OWM we strive to empower our clients with
dynamic and objective strategies that help
them build, enhance and importantly protect
their wealth. We work to get our clients to think
outside the box, set clear goals, and have realistic
• Concentrated Equity Strategies
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