Generally, the potential for higher returns from investments comes with greater risks. One philosophy to keep in mind, especially for those approaching retirement, is that Losses Hurt More than Equivalent Gains Help®. In other words, if you have $100,000 in a portfolio and it goes down 50 percent in a year, a 50 percent gain in the following year would result in your portfolio being valued at only $75,000. Keeping this in mind reminds you to seriously weigh any risks against potential returns.
It is especially imperative to consider the balance of risk and potential return as investors approach retirement as they have less time to recover their losses if their portfolio declines in value. A financial professional can help you assess your personal risk parameters for your investment portfolio.