How should you think about risk?

Is there any truth to the notion that women tend to be more risk-averse when it comes to investing? Jane Greenfield, CIMA®, of Vanguard Charitable and Kahlilah Dowe, CFP®, of Vanguard Personal Advisor Services, discuss the different ways people define risk in this context, and share some practical tips for investors who want to focus on aggressive growth while maintaining a well-diversified portfolio and avoiding excessive volatility.

“Women and investing: Unique situations, practical suggestions” webcast

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Rebecca Katz: Well, let’s talk about that because one of the, I guess, mantras out there is that women tend to be a little bit more conservative than men when it comes to investing. That may be generational too.

But we did have a couple questions. We had one from Victoria that said, “Should I be a little bit more risky with our portfolio, because I tend to be more conservative?” And then Brittany in California said something similar. She said, “I really think I need to take more risk, but I’m hesitant. Is there anything you can tell me to help me with this?”

So how should women think about risk? Jane, do you want to take that?

Jane Greenfield: Yes. I do. I think sometimes taking on more risk feels like you’re going to lose it all, and people forget that if you’re too conservative, there’s a way to lose as well. The real value of your assets could decline because of inflation. So there’s more than one risk to manage. It’s not just market volatility. So that’s one thing I would say.

But the amount of risk you should take always really depends on your time horizon. When are you going to need the assets? And it also depends a bit on your stomach, like, how much volatility can you really stomach? And that differs person by person.

But if you’re really looking for a little context on what might be reasonable in terms of risk, my advice would be to go to and look at the target-date funds because target-date funds are structured for people who are saving for retirement.

So if you’re 20 years or more out from your retirement age, well, you really want a lot of equity exposure, 90%. But if you’re ten years out, that’s going to ratchet down; five years out, that’s going to ratchet down further. So I would just say it’s helpful context.

Rebecca Katz: Yes, a starting place.

Jane Greenfield: It’s a starting place.

Rebecca Katz: Great.

Kahlilah Dowe: And I would just add that I think it’s important to take on risk, but we don’t want investors to take on risk just for the sake of taking it, right?

Jane Greenfield: Right.

Kahlilah Dowe: You want to get more aggressive growth in the portfolio. And I want to make that distinction because even though that comes with risk, it’s different from speculation.

Jane Greenfield: Yes.

Kahlilah Dowe: Because some people may feel like, “Okay, I have a lot of time on my hands before I retire, that means I can invest more in individual stocks or I could invest more in sector funds.” And that’s also a form of risk.

So I just wanted to specify it’s not necessarily risk that we’re looking for. It’s more aggressive growth because you have a greater risk capacity, but we want to try and do it in a way that minimizes the volatility in the portfolio.

Jane Greenfield: Yes, that’s a great point. I always assume when we talk to our investors at Vanguard, they’re thinking about well-diversified funds and they’re looking at asset allocation.

Rebecca Katz: Not bitcoin? Come on, no bitcoin?

Jane Greenfield: But that’s right, no bitcoin. But, no, everyone defines risk differently. It’s a great point.


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