On today’s show Tyler Alvord and Jordan Rummel discuss investing risks. The risks focused on in this episode are around the impacts to a personal portfolio. Tyler and Jordan give ideas on how to address or think about risk.
The SEC’s website Investor.gov defines risk as the following: In finance, risk refers to the degree of uncertainty about the rate of return on an asset and the potential harm that could arise when financial returns are not what the investor expected. In general, as investment risks rise, investors seek higher returns to compensate them for taking on such risks.
Tyler discusses Warren Buffet’s view on risk which is detailed in his Berkshire Hathaway’s 2017 annual letter which can be found here: Warren Buffett 2017 Annual Letter.
Tyler and Jordan review having the appropriate asset allocation to keep you invested for the long-term while keeping your purchasing power intact. The chart below shows the average bear market duration is just over 40 months or 3.5 years, with the average percentage decline of 35%. The chart below also notes these bear markets, defined as 20% or greater declines in the S&P 500, happen once every 7 years.