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- While investing conservatively might sound good, it can actually be a risky move — your money may not get the returns you need to meet retirement or other long-term goals.
- If you have a large sum of cash bigger than what you need for an emergency fund, you may not be investing enough.
- Being invested too conservatively might mean that your portfolio isn’t gaining value over several months, or moving much at all.
- And, if a portfolio is full of investments like bonds and money market funds, it might be too conservative and need more aggressive investments, like stocks, for a chance at higher returns in the future.
- Start investing today with SoFi »
In investing, being too conservative isn’t as good an idea as it sounds. For investments that rely on returns to grow, like retirement savings, being invested with the right amount of risk is essential.
“Being too conservative may actually be the riskiest thing you can do,” says CFP and Facet Wealth co-founder Brent Weiss. In his experience, the right amount of risk varies from person to person — it depends on how much risk someone can emotionally handle, how much risk your long-term plan allows for, your age, and how much risk someone really needs to take to make investments grow to their target goal.
“The consistent way to build wealth long-term, especially for retirees to maintain their purchasing power [in retirement], is by having the risk of stocks and equities in your portfolio,” Weiss says.
Weiss says there are three sure signs to look for