Defining the Proper Amount of Risk

In his book “Simple Wealth, Inevitable Wealth” Nick Murray makes two assessments related to risk that I believe the average investor is guilty of:

1) People greatly overestimate the long-term risk of owning investments in the stock market.

2) People seriously underestimate the risk of not owning investments in the stock market.


It is one thing to read these concepts in a book, but it is an entirely different thing to apply them to your specific financial situation. It might feel difficult to make that leap.

While we know investing over the long term increases the odds of success, the reality is the markets change in the short term. Near-term fluctuations, coupled with news headlines, can create a mix of exuberance and anxiety. These emotions can bombard us as frequently as daily, yet we must persevere with the end goal in mind.

I believe there are two “free lunches” that contribute to successful investing: time and diversification. At BCS Wealth Management, we are investment advisors who take a long-term approach. While long-term can mean something different to everybody, we generally define it as five years or longer.

With that in mind, we create durable, diversified investment strategies that coincide with our clients’ investment objectives and goals. Depending on each person’s unique circumstances, there are a variety of ways to achieve their goals.

We aspire to make the investing journey as comfortable as possible. How? We define the goals, our plan to achieve them, and the risk associated with that plan. This gives everyone involved a sense of ownership and accountability. When defining investment risk, we work through a number of conversations, for example:

How much risk do you want?

How much risk are you currently taking?

How much risk do you need to take to achieve your goals?

What if? This is a matter of discussing negative scenarios that could affect your portfolio.

After pinpointing an appropriate amount of risk, we can craft a strategy that aligns with our client’s personal preferences and priorities. The resulting financial plan and investment portfolio will include short- and long-term projections for the potential range of gains and losses we should expect over time. This helps clients feel comfortable with their expected outcomes.

We combine our depth of investment knowledge and expertise, investment philosophy, and cutting-edge technology to empower our clients to invest with peace of mind. This allows us to be fully aware and plan for short-term volatility while also being mindful of the long-term objective. The aim is to create an enduring investment plan that successfully charts a path to achieving your goals.

Warren Buffett once said, “Risk is not knowing what you’re doing.” That is where we come in. We are honored to serve as a trusted partner to our clients and help them achieve financial success through clear communication and comprehensive planning.

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