--- title: 4 Common Portfolio Risks and How to Avoid Them description: How to prepare your portfolio for and help avoid 4 common portfolio risks in today's environment, including outliving your money and market declines. --- [![Assembly Wealth](https://www.letsassemble.com/hs-fs/hubfs/Assembly/logos/Assembly-Wealth-Logo-Orange-500px.png?width=300&height=70&name=Assembly-Wealth-Logo-Orange-500px.png "Assembly Wealth")](https://www.letsassemble.com/) The Money Manager People TM [800-541-7774](tel:+18005417774) [![RESEARCH MONEY MANAGERS](https://no-cache.hubspot.com/cta/default/10700/7ecbcb66-3fbb-41e3-b219-c24fb3c769c5.png)](https://cta-redirect.hubspot.com/cta/redirect/10700/7ecbcb66-3fbb-41e3-b219-c24fb3c769c5) [![Client Center](https://no-cache.hubspot.com/cta/default/10700/8691dcb4-caa3-42c2-a810-77b59f461fd2.png)](https://cta-redirect.hubspot.com/cta/redirect/10700/8691dcb4-caa3-42c2-a810-77b59f461fd2) [Home](https://www.letsassemble.com/) WrapManager's Wealth Management Blog When life changes, we can help you thoughtfully respond. [< Back to read another post](https://www.letsassemble.com/wealth-management-blog) # 4 Common Portfolio Risks and How to Avoid Them Posted by [ Michael J. O'Connor | CWS®, Vice President Investments](https://www.letsassemble.com/wealth-management-blog/author/michael-j-oconnor) July 1, 2014 - [Tweet](https://twitter.com/share) A key to investing well is finding balance between opportunities for growth and the potential risks that come with them. You want to generate returns needed to meet your long-term goals while limiting the potential portfolio risks associated with downside volatility and other adverse events.1 Practically every investor faces the following four risks to their portfolio. While each risk can be addressed in specific ways, start with good planning with your financial advisor, regular updates to your investment plan and being properly diversified. Then move on to the more specific methods below. ### Portfolio Declines Due to Market Volatility To paraphrase Boston **[money manager Newfound Research, LLC](https://www.letsassemble.com/money-manager-research/newfound-research-llc)**, ‘investors don’t live in a world of “100 year averages.” Instead, they live in a world of 40 year investment horizons, where significant declines can permanently impair retirement portfolios as investors do not necessarily have ‘more time’ to make up from large losses.’2 - **Diversify Your Sources of Income** **[Reducing the amount of income you withdraw](https://www.letsassemble.com/wealth-management-blog/managing-your-retirement-income-what-to-do-during-down-markets)** from your investment portfolio during extended market downturns can help reduce the impact to your portfolio. - **Consider Investing in a Tactical Money Manager Strategy** **[Newfound](https://www.letsassemble.com/money-manager-research/newfound-research-llc)** is one such money manager, whose goal is to participate in rising markets while also seeking to limit capital losses when the market declines. Newfound's strategies are designed with the ability to move to 100% cash in an attempt to limit large losses.2 ### Outliving Your Money According to the Social Security Administration, a man turning 65 today is expected to live to age 84, and a woman of the same age will reach 86 on average. About 25% of 65 year olds will live past age 90.3 For many, that means several years of pulling retirement income from your investments, which can increase the risk of outliving your savings. - **[Create a Retirement Income Strategy](https://www.letsassemble.com/wealth-management-blog/create-your-retirement-income-strategy-with-an-investment-plan) with your Financial Advisor** This involves taking the time to map out your income needs throughout retirement, and then layer-on additional unforeseen/emergency expenses to create an income buffer. - **Seek Out [Income-Producing Money Manager Strategies](https://www.letsassemble.com/wealth-management-blog/4-dividend-money-manager-strategies-to-consider)** Income-generating money manager strategies may help your portfolio produce additional income that can be used to cover expenses or be reinvested. Two such strategies to consider are the Federated Strategic Value Dividend strategy or the Newfound Risk Managed Income strategy. ### Losing Purchasing Power Over Time A recent study by JP Morgan shows that since 1985, inflation has increased at a faster pace for those aged 62 and older. The **[rising cost of health care](https://www.letsassemble.com/wealth-management-blog/relocating-for-retirement-health-care-costs-could-matter)** plays a significant role in that, and for retirees it could mean increasing expenses over time. The risk here is spending down your savings at a faster pace than you anticipated.4 - **Make Sure Your Portfolio is Balanced for Growth and Income** Factoring-in rising health care and other costs to your portfolio creates the need for a certain level of growth over time. As a result your investment plan may call for your portfolio to have a reasonable amount of equity exposure, for example. Your financial advisor can help you determine an appropriate level. ### Life Changes Requiring Significant Changes to Your Investment Plan Sometimes life hands us surprises, and sometimes those surprises result in unforeseen costs. Whether it’s the need for extensive medical care, helping out a relative or a friend, or losing a source of income due to **[circumstances you cannot control](https://www.letsassemble.com/wealth-management-blog/retirement-planning-how-do-you-plan-for-things-you-cant-control)**, the risk could affect your retirement income strategies. - **Factor Unforeseen Expenses into Your Investment Plan** Have your financial advisor show you how your investment plan would be affected long-term if you were met with a sizable expense a few years into retirement. This is a good way to **[test your investment plan](https://www.letsassemble.com/wealth-management-blog/when-was-the-last-time-you-stress-tested-your-investment-portfolio)** to see if it can withstand setbacks. - **Hold Cash Reserves** **[Holding too much cash on the sidelines](https://www.letsassemble.com/wealth-management-blog/holding-cash-can-protect-your-portfolio-but-can-hurt-your-retirement)** could mean forgoing growth, but it could make sense to hold a year or two’s worth of living expenses aside so that you do not need to withdraw from your portfolio when you have an unexpected need. ### Use an Investment Plan to Help One of our Wealth Managers can take a detailed look at your portfolio, while helping you assess each of the risks above. We can discuss ways you can adjust your portfolio to better position yourself against them. Call us at 1-800-541-7774 to have the conversation today, or **[answer a few brief questions here](https://www.letsassemble.com/free-money-manager-recommendation)** to get started on your investment plan. [![Like What You've Read? Subscribe Here!](https://no-cache.hubspot.com/cta/default/10700/5ce6db8c-6757-43bb-831d-b67f40d96a4c.png)](https://cta-redirect.hubspot.com/cta/redirect/10700/5ce6db8c-6757-43bb-831d-b67f40d96a4c) [![Michael O'Connor Certified Wealth Strategist](http://www.wrapmanager.com/hs-fs/hub/10700/file-2461927908-jpg "Michael O'Connor Certified Wealth Strategist")](https://www.letsassemble.com/wealth-management-advisors/michael-oconnor)* By [**Michael J. O'Connor, CWS**](https://www.letsassemble.com/wealth-management-advisors/michael-oconnor)*[***®***](https://www.letsassemble.com/wealth-management-advisors/michael-oconnor) *Michael is a Certified Wealth Strategist and Wealth Manager at WrapManager, Inc.* --- Sources: 1 Wells Fargo 2 Newfound Research LLC 3 [Social Security Administration](http://www.ssa.gov/planners/lifeexpectancy.htm) 4 [JP Morgan Asset Management](https://www.jpmorganfunds.com/cm/Satellite?UserFriendlyURL=diguidetomarkets&pagename=jpmfVanityWrapper)   Strategy descriptions listed represent a brief outline of the portfolio’s objective. There is no guarantee that any manager or product will be successful in achieving the objective described. The strategy used by the money manager listed is not suitable for all investors. This material does not represent a personalized recommendation and does not reflect individual investor’s risk and return goals nor does it serve as the receipt of, or a substitute for, personalized advice from WrapManager, Inc. or any other investment professional. [Investment Planning](https://www.letsassemble.com/wealth-management-blog/topic/investment-planning) ### Subscribe to Updates [Subscribe to RSS Feed](https://www.letsassemble.com/wealth-management-blog/rss.xml) [![New Call-to-action](https://no-cache.hubspot.com/cta/default/10700/ffe2a394-957b-481b-9f80-4ef176bd6aaf.png)](https://cta-redirect.hubspot.com/cta/redirect/10700/ffe2a394-957b-481b-9f80-4ef176bd6aaf) ### Most Recently Published ### Blog Authors [![Gabriel Burczyk](http://www.wrapmanager.com/hs-fs/hub/10700/file-2347381761-jpg/Athors_Avatars/Gabe-avatar.jpg "Gabriel Burczyk")](http://www.wrapmanager.com/wealth-management-blog/author/gabriel-burczyk) [**Gabriel Burczyk,**](http://www.wrapmanager.com/wealth-management-blog/author/gabriel-burczyk) [Founder & CEO](http://www.wrapmanager.com/wealth-management-blog/author/gabriel-burczyk) [![Valerie De Vol](http://www.wrapmanager.com/hs-fs/hub/10700/file-2457588837-jpg/Athors_Avatars/Valerie-De-Vol-avatar.jpg "Valerie De Vol")](http://www.wrapmanager.com/wealth-management-blog/author/valerie-de-vol) [**Valerie De Vol, **IACCP® Chief Operating Officer](http://www.wrapmanager.com/wealth-management-blog/author/valerie-de-vol) [![Seton-avatar.jpg](http://www.wrapmanager.com/hs-fs/hub/10700/file-2344519198-jpg/Athors_Avatars/Seton-avatar.jpg "Seton-avatar.jpg")](http://www.wrapmanager.com/wealth-management-blog/author/seton-mcandrews) [**Seton McAndrews, **CFP® ](http://www.wrapmanager.com/wealth-management-blog/author/seton-mcandrews)[Vice President - Investments](http://www.wrapmanager.com/wealth-management-blog/author/seton-mcandrews) [![Doug Hutchinson](http://www.wrapmanager.com/hs-fs/hub/10700/file-2347381751-jpg/Athors_Avatars/Doug-avatar.jpg "Doug Hutchinson")](http://www.wrapmanager.com/wealth-management-blog/author/doug-hutchinson) **[Doug Hutchinson,](http://www.wrapmanager.com/wealth-management-blog/author/doug-hutchinson) **[CFA® ](http://www.wrapmanager.com/wealth-management-blog/author/doug-hutchinson)[Director of Research and Trading](http://www.wrapmanager.com/wealth-management-blog/author/doug-hutchinson) ![Katie - square.png](https://www.wrapmanager.com/hubfs/Katie%20-%20square.png "Katie - square.png") [**Katie O'Connor **Director of Client Services](https://www.wrapmanager.com/wealth-management-advisors/katie-oconnor) **Important Disclosure Concerning WrapManager Blogs** Blogs found at this site have been created or supported by WrapManager. 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