Risk means different things to different people.
They may characterize themselves as aggressive or conservative when it comes to investment risks, without understanding how that pertains to their holdings. For instance, investors think putting all their money in bonds might make them conservative, but if interest rates rise, their bonds will surely lose value.
“People talk about their risk tolerance, but when you change the question to what’s their loss tolerance, they answer differently,” says Jeremy Kisner, senior wealth adviser at Surevest Wealth Management in Phoenix and Las Vegas. “A lot of people don’t understand risk.”
Your age plays a role in the investment risks that you can tolerate, and even what you should worry about. For younger investors, who have many years to grow their nest egg, volatility is their concern. Older investors, who are hopefully out of the money-generating stage and in the preservation stage of investing, have to contend with inflation and interest-rate risk.
From longevity risk to interest-rate risk, here is a look at five investment risks and how people of every age face them.
Compare certificate of deposit rates at Bankrate.com.