Helping to Manage Risk in a Changing World — Part 4: The Potential Risk of Playing It Too Safe

Over the past few weeks, we’ve explored different ways to help manage risk: understanding its many forms, using asset allocation and diversification, and navigating legacy stock positions with low-cost basis on non-IRA accounts. But there’s one type of risk that often goes overlooked—the potential risk of playing it too safe.

When markets feel uncertain, it’s natural to want to pull back. Shifting heavily into cash or ultra-conservative investments may seem like a prudent choice. But just as overexposure to stocks can be risky, so can being underexposed.

The Hidden Risks of Over-Conservatism

• Inflation Risk: Cash may feel safe, but it steadily loses purchasing power as prices rise. Over time, this “silent risk” can erode wealth.

• Longevity Risk: With people living longer than ever, portfolios may need to last not just decades, but potentially generations. Too little growth can leave retirees vulnerable later in life.

• Opportunity Cost: By sitting out of the market, investors may miss the compounding power of reinvested dividends, market recoveries, and long-term growth.

Finding Balance

Risk management is not about eliminating volatility at all costs. It’s about aligning a portfolio with both the need for stability and the need for growth. For some, this may mean keeping enough safe assets to cover near-term spending needs while allowing the rest of the portfolio to pursue long-term returns.

It’s a balancing act: leaning too heavily on “safety” can introduce new risks, just as overreaching for growth can create exposure. The goal is to avoid extremes and build a plan that can adapt to both your goals and the changing market environment.

The Bigger Picture

Ultimately, risk is not something to fear—it’s something to understand. Every choice carries risk, whether it’s investing aggressively, holding legacy stocks, or sitting on the sidelines. One of the key aspects is to approach those choices with wisdom, perspective, and a long-term plan.

At Tanner Wealth, we believe that managing potential risk is what helps give clients freedom. Freedom to spend with confidence, freedom to give generously, and freedom to live fully without fear of what the market might bring next.

This completes our September series on managing risk. If you missed earlier parts, we encourage you to go back and explore each perspective—because together, they help paint a picture of a balanced approach to both growth and preservation.

By John Tanner, VP | Regional Leader | Wealth AdvisorFI Advisors, Inc.913 N PATTERSON STVALDOSTA, GA 31601 229-232-8211

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