Investing comes with a certain amount of risk, and that turns some people off of it altogether. But your risk level varies depending on many different factors. When it comes to investing, it’s better to focus on exposure.
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Over at the New York Times, financial planner Carl Richards reminds us that we can’t control risk, but we can control our exposure to it. Because of this, you shouldn’t focus on risk, you should focus on exposure.
As we deal with a world that feels more risky, I suggest making exposure our priority. While risk poses the question, “What could happen?” exposure asks, “What impact would it have on me?” We can’t always answer the first question, which creates stress and confusion. But we always have a pretty good idea how to answer the second.
Point is: sure, there’s risk. But you can minimise its impact. When it comes to investing, this means focusing on your asset allocation, rather than the market, which you have little control over.
Learning about how to minimise your exposure to risk is a lot more lucrative than simply not investing at all. To check out what else Richards has to say on the matter, click the link below.
Exposure Offers Clarity in the Risky World of Investing [The New York Times]