Your Money Mistake: Not Enough Risk

With every financial decision, you have to balance two competing urges: the desire to not be poor and the desire to be rich. Lately the former has been trouncing the latter.

“Investors are stuck on protection of principal when they should be focused on what their principal can do for them,” says Colleen O’Brien, a vice president at Charles Schwab. Your principal will be supporting your golf games and travels after you retire, so head to a savings calculator like the one at and run the numbers using a cash return of 3%.

That’s not the comfortable retirement you were hoping for, right? Now do it again assuming a stock and bond portfolio earning 7%. “When you force yourself to focus on what you want your retirement to look like,” says O’Brien, “that helps you get moving toward that goal.”

The EBRI Retirement Confidence Survey found that workers who have done some kind of retirement calculation have higher — and more realistic — savings goals than those who have never run the numbers. Plus, 67% of the doers are confident about retirement, vs. 49% of all workers.

But don’t be a hero. Do you know what will really turn you off stocks for good? Jumping in with both feet today, just as the market is nearing its pre-crash highs, and then taking another beating on the next dip.

If you’re in your thirties or forties and afraid of the market, aim to reach, say, 30% in stocks over the next two years. That’s still too conservative for someone your age, but it’s a start.

Divide to conquer your fears. Splitting your money into long-term and short-term buckets — the same trick that can stop you from jumping in and out of stocks — can also help you overcome your fear of stocks in the first place. Again, your long-term bucket doesn’t have to be filled to the brim with stocks.