Getting to Retirement With Minimal Financial Risk

JPMorgan Chase’s giant trading loss began as an effort to manage the bank’s risks — a move that turned into something that now looks more like a speculative bet. But don’t think this is solely a big-bank problem. Even small investors can run into trouble discerning the fine line between hedging and risk taking.

Investors can try to limit their risks by holding down their stock exposure through diversified investments. But many people are still depending on the market’s engine — perhaps more than they might think — to maintain a comfortable lifestyle in retirement, say, or pay for their children’s college educations. 

While this strategy has worked for many people and is considered prudent by financial advisers, it’s still a wager. Your portfolio can take a painful nose dive just before you retire, which means you may have to work longer (if you can) or cut spending. But somewhere along the way, as pensions vanished and 401(k)’s took hold, investing in stocks for retirement was viewed as a manageable risk. After all, even after the market collapse in 2008-9, what other choice is there?

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