Although we may not realize it, all of the decisions we make involve some calculation of risk versus reward. From simple everyday choices like getting lunch at the usual spot or trying someplace new, to more complex decisions like how to invest for retirement, our brains are wired to view decision-making as the process of calculating potential reward and inherent risk.
Today’s early news that the U.K. voted to part ways with the European Union, in a historic vote commonly referred to by news media outlets as “Brexit,” has had a tumultuous effect on global financial markets. The uncertainty the future holds has led many to panic, and investments that are traditionally more volatile to begin with moved sharply downward in many sectors of the market.
From the perspective of a highly compensated employee, the consequences of a sudden loss of share value can be hugely impactful when the bulk of your retirement fund is tied up in your company’s stock. Depending on your circumstances, that could mean the difference between retiring next year and having to work well into your 70s.
Under the new rule as written, firms have until January of 2018 to comply. If that sounds like a long time, maybe that’s because there’s a lot of catching up to be done out there. After all, not every financial services business was built from the ground up to act in the best interest of its clients above all else.
There is no magic formula to work from here, but evaluating your portfolio for proper balance according to your risk tolerance and goals should never be ignored for too long. In addition, portfolios aligned with higher risk tolerances may have a higher potential to become unbalanced in less time than more conservative portfolios, and should be evaluated more frequently.