For Long-Term Investors, the Focus Should Be on Risk

by Paula Hogan and Zvi Bodie

For Long Term Investors, The Focus Should Be On Risk Splash image

There is a common notion that stocks, at least if held for a long-time, usually outperform other assets, so that stocks should be the cornerstone of any long-term portfolio.

If, when this idea is presented, you protest: “Wait a minute. Stocks are also risky!" the reply is either, "Stocks have done well in the past and so they will probably also do well in the future," or "If you have a long time horizon, you'll do well in stocks."

However, the thoughtful investor must also wonder: “But what if stocks don’t do well? What happens then to my retirement?”

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Paula Hogan , CFP, CFA, is a fee-only adviser based in Milwaukee, Wisconsin, and a frequent speaker and author in the financial planning field. She maintains a website at
Zvi Bodie , Ph.D., is a professor of finance and economics at Boston University School of Management. He maintains a website at


JY from Oregon posted 4 months ago:

The conservative half of me recognizes the need to concentrate on minimizing investment risk, especially when significant market downturns can lower one's standard of living, or worse, for the remainder of life. The practical half of me recognizes that being too conservative, especially when real inflation (i.e. food inflation, etc.) exceeds the amount of safety purportedly offered by inflation protected securities (i.e. TIPS) and similar investment instruments.

The author makes intelligent points worthy of consideration. However, it is also true that we all must be willing to take on more risk than we are comfortable with to ensure that we don't merely survive until we die. I guess if we were all multi-millionaires this would be a mute discussion.

John G from Texas posted 4 months ago:

My wife and I ( 68 & 69 ) have about 1.5 million in qualified money in stocks managed by a non dark side advisor. Another 500k in cash. Still working. And a passive real estate income of around 200k/yr. Should we stay the course in stocks?

Sanford Levey from Massachusetts posted 4 months ago:

"Sandy" L from M
I wish I were in John G's shoes. my wife&I (72 & 77) have about 450k in 401k
Sable value fund & about 200k in stock funds. And also 65k in cash. so I ask the same question as above. Should we stay the course in stocks?(funds actually)

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