Risk, Where art Thou
Risk is everywhere. Most of the time we don’t realize it. But it’s there.
It’s always present and it’s everywhere.
Let’s think about just a few things that seemly come out of nowhere, but probabilistically we should expect several "unexpected" life events to happen to us and the people we love.
Here’s a short list of just some of the “risks” we might experience:
But most of us don’t think about all the things we will very likely experience in our lifetime. Some more serious than others, and depending on the nature of the circumstance, it can change our immediate plans or impact our life indefinitely.
With the COVID-19 pandemic, people the world over received an awful reminder of how risky life really is. Most of us were affected all at once, the risk of our health, our freedom of movement, our incomes, and in a period of just 4 weeks, the stock market wiped out the previous 4 years of returns. The precipitous drop provided a hard reminder of the nature of risk and uncertainty.
During the good times, it’s easy to forget that.
What’s the best way to predict the future?
The best way to predict the future, is to plan for it.
How do we do that?
Take a step wise approach to planning.
Example: What are the various health issues that you or a family member might experience? What would you do in each case? Who would do what? How would it be paid for? etc.
What are the various contingencies if you lose your job? How do you plan for this? What needs to be done today and in the near term to ensure that you can withstand this possibility?
Never forget the future is always unknowable. But with some thoughtful planning, you can dramatically reduce the impact of these various risks. You can also reduce your anxiety by having a well-designed process for dealing with these life events. Part of reducing the stress that some of these risks can bring, is understanding that it’s part of living and even with proper planning, somethings are just out of our control.
-Paul R. Rossi, CFA
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