Mitigating Less Obvious Risks

While we know that in order to achieve your long-term goals, investing appropriately is highly important, it’s also important to know of all the risks that come with investments. When it comes to managing your investment risks, there are some risks that are obvious and everyone is aware of them, like the risk of buying a losing investment or the risk of a major unexpected expense while the market is down. However, there are other risks that are less obvious but can be just as dangerous to your financial well-being. Let’s discuss some of the risks that are less obvious: inflation risk and the risk of not knowing the longevity of your retirement funds.

Inflation Risk

Inflation risk refers to the risk that the purchasing power of your money will decrease over time. Inflation can be particularly dangerous for retirees or those on a fixed income. If you have a set amount of money in savings or investments, and the rate of inflation is higher than the rate of return on your investments, then your purchasing power will decrease over time. This basically means that you have more dollar amount than you initially had, but that amount will buy you lesser now than it did initially.

In order to protect yourself from inflation risk, it is important to diversify your portfolio to include asset classes that aim at achieving a higher return than the rate of inflation. A couple of years ago when inflation was quite low, it was easier to achieve a net positive rate of return. In times like today, it is harder to achieve a net positive rate of return through a GIC, or other safer asset classes.

Risk of Not Knowing the Longevity of Your Funds

The risk of not knowing when you are running out of money is another less-obvious risk that can easily be avoided when you have done the right planning. This risk refers to the possibility that you may outlive your savings and run out of money before the end of your life. People these days are living longer, and healthcare costs have increased.

To mitigate this risk, it is important to have a solid financial plan in place. This may include a combination of all your income streams and your retirement funds. Additionally, it is important to regularly review your financial plan and adjust it as needed based on changes in your financial situation.

In conclusion, managing your finances involves more than just avoiding obvious risks such as market volatility or unexpected expenses. It is important to also be aware of less-obvious risks such as inflation risk and the risk of not knowing the longevity of your funds. Moreover, it is also important to take steps to mitigate these risks as much as possible. By doing so, you can help ensure that your financial future is secure and comfortable. Click here to schedule a free 30-minute consultation.

- Jai Gandhi, Associate Investment Advisor

Jai Gandhi is an Associate Investment Advisor at Endeavour Wealth Management with iA Private Wealth, an award-winning office as recognized by the Carson Group. Endeavour Wealth Management provides comprehensive wealth management planning for business owners, professionals and individual families.

This information has been prepared by Jai Gandhi who is a Associate Investment Advisor for iA Private Wealth and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained here in may not apply to all types of investors. The Investment Advisor can open accounts only in the provinces in which they are registered.

iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.

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