Risk Management

CafeCredit.com / Flickr.com https://bit.ly/2NniHxN

Diversification. It’s one of those words that you hear thrown around by financial types, but too often no one slows down enough to explain exactly what it means.

Diversification is a risk reduction tool. What do I mean by that?

By their very nature, investments are risky. The value of any single investment can go down dramatically due to any number of circumstances. But when you spread that risk around by having different kinds of investments, your risk of losing money over the long term is greatly reduced. Not eliminated, but reduced.

Christos Tsoumplekas / Flickr.com https://tinyurl.com/yb3qazpm

Fear is a funny thing – it often tricks us into exchanging one perceived problem for a much larger one.

I don’t know too many folks who break into a cold sweat when they get into a car to drive a few hours. But let that same person board an airplane, and they are much more likely to experience a heightened sense of fear, even dread.

 

The National Safety Council estimates your lifetime odds of dying in a car accident at about 1 in 100. For air travel, the lifetime odds are about 1 in 200,000.