How Much Money Can You Afford to Lose? WRONG QUESTION!!!!

Last week, I met a delightful individual who was understandably distressed by her broker’s remark that she could “afford to lose” a particular sum of money.  In certain respects, it’s predictable that an advisor might make such a remark…many are taught to do so.  In addition, investors often ask themselves, “How much can I afford to lose?” 

However…it’s the WRONG question!  The RIGHT question is this:  How much wealth must I preserve/have in order to reasonably ensure my desired lifestyle and…peace of mind?  

This is the question you must ask yourself…and…it’s the one your advisor must help you work through.  Only after answering this question can someone decide how much money he or she is willing to commit to additional risk. 

Times are tougher than most want to admit!  The global economy is increasingly flirting with recession.  If recession or significantly slower growth become reality, it will be more challenging to obtain desired returns.  Volatility with a downward bias will become more likely than less likely. 

So…how much wealth must I preserve in order to reasonably ensure my desired lifestyle and peace of mind? 

Any other question…is out of the question!    

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