Investment Risk & Reward

Scott goes over the importance of putting the roof on your financial house, expecting higher returns on investments that involve more risk. 

While your foundation is built on safer, secure investments such as cash, CDs, or treasury bonds, we only expect about 1-2% returns at best. The roof will bring a higher return over time. 

Assets in Your Roof: 

Stock Market 

Many people ask if investing in the stock market is just gambling. The answer – absolutely not. 

Stock is based on a company that is producing and providing a service, and it should be growing over time as the company grows. If they stop growing or hit hard times, the value of your investment will start to drop. 

The beauty of the stock market is you can pick 10-20 to hold on to, or you can spread out that risk and invest in hundreds of companies and different funds. The diversification spreads out your risk. 

What do you get for that risk and volatility? 

We expect moment-by-moment volatility, but historically, we have seen average earnings of 10% over longer periods of time. Yes, the market holds risk and regular fluctuation, but earning 10% is better than 2%. You just have to withstand some risk and volatility to do it. 


Is gold safer than the stock market? 

Gold is not necessarily safer than the market since it also has some volatility with huge returns and huge drops. Since it is separate from the market, it can be a good diversifier; if the market is down, gold can be up. It differs from a producing company that is growing in that it has value because society has placed value on it. 

Since 1971, gold has averaged about 10% return making it another good option for long-term value. 

What About Collectibles? 

With guns, art, coins, baseball cards, and other collectibles, there is no average return since there is no free-flowing, transparent market to check values. Their value is dependent specifically on what collectibles you own and how you can liquidate them. 

Collectibles also require extra effort such as hiring an appraiser and finding a market. They can be a good diversifier and help you attain higher returns over time, but all in all, they are far less liquid than other options. 

Just as you need to build your foundation, you need to build your roof. Taking more risk to get a higher return for long-term growth is an important part of your Investment Plan and an important part of your overall financial health.

If you have any questions, please don’t hesitate to call us at 844-CARLSON.

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