Investing too much in S&P 500 Index funds without proper risk management can be a dangerous prospect. These Indexes are fully exposed to the fickleness of the stock market, making them high risk/high reward. However history makes clear that this is often not how people close to retirement want to run their investments. From 2007 to 2009, for example, investors lost huge amounts of money due to market fluctuations. Younger investors had adequate time to recover, obit many older ones didn’t.
- Many investors today have failed to emphasize risk management in their decision making, placing them in a riskier situation than is wise for their specific circumstances.
- Investors took huge losses during 2007-2009, and while younger investors had time to recover, people closer to retirement did not.
- S&P 500 investments are exposed to the volatility and risk of the stock market, and like all investments, they should be seen only as a means to an end, not a goal for their own sake.
“The over-use of S&P 500 Index funds today is at the core of that threat.”