474: The Reality of Investment Risk: Why Low Probability of Loss Doesn’t Equal Low Risk
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Dec 20, 2024
Dive into the true meaning of investment risk and why low probabilities of loss don't necessarily indicate safety. Discover how statistical anomalies must be integrated into smart investment strategies. Explore the importance of risk mitigation and learn how effective management can lead to greater returns. Assess the value of steady investment practices over flashy successes to build wealth gradually. Real estate investment insights offer a realistic view on costs and preparations for market downturns.
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insights INSIGHT
Probability vs. Frequency
Low probability events can still occur frequently.
Consider the frequency of unlikely events like hole-in-ones.
question_answer ANECDOTE
Hole-in-One
Casey Weade, a skilled golfer, has never had a hole-in-one.
Marshall Johnson and Casey's grandmother-in-law, less skilled golfers, have had multiple hole-in-ones.
insights INSIGHT
Defining Investment Risk
Investment risk is not just about the odds of winning or losing.
True risk lies in the severity of potential permanent losses.
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The Science of Retiring with Confidence; The Art of Living with Purpose
Casey Weade
Job Optional is a thoughtful and down-to-earth guide to retirement planning. The book offers unbiased, commonsense advice based on the author's experience as a retirement planning professional. It acts as a primer to the financial world, making complicated topics accessible, and provides a step-by-step guide to planning your own retirement. The book focuses on identifying a life purpose and creating a plan to organize assets efficiently to achieve that purpose. It covers various financial concepts, strategies, and terms, including purpose-based asset allocation, liquidity planning, income planning, growth planning, and estate planning. The author interweaves personal stories to make financial planning real and understandable, emphasizing that success is not just about money but about purposeful living.
What determines financial “success”? A major factor includes your ability to play financial defense and minimize the severity of potential investment failure.
In this episode, we discuss:
The definition of “investment risk”
How to factor statistical anomalies into your investment plan
What it means to mitigate risk in your retirement strategy
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ABOUT HOWARD BAILEY FINANCIAL: Our mission is to help others gain clarity in purpose and elevate meaning in their lives through personal and practical financial strategies. Our Retire With Purpose™ Framework starts with establishing your unique financial philosophy — the true meaning and purpose for your money in retirement. Through continued education, one-on-one meetings, and a comprehensive team planning approach, we have helped retirees across the country secure their financial futures. And while we can't work with everyone, our goal is to provide value to everyone we meet. Our team of advisors and support specialists strive to deliver the very best experience in pre-retirement and retirement planning. Learn more about our process here: https://howardbailey.com/our-process
Retire With Purpose - The Retirement Podcast 