Ok let’s chat Income risk. Whether you are currently working or have already embraced the work optional lifestyle of retirement, one thing that remains constant is your need for income.
The paycheck may be soon to cease or it may already have, but the bills certainly won’t!
Wall Street will have you turn to your stock portfolio as your funding solution. While many will rely on this, it can be very risky, especially if that is your only income funding mechanism.
Jumping back to the market risk pocket for one moment, recall the risk that correlation poses to the portfolio. That is the like or identical movement of assets when markets drop, causing most everything you own to lose simultaneously.
Well to me, true diversification incorporates the use of instruments that are immune to the correlation risk. Yet can also provide a stable and consistent income stream and may also serve a dual purpose.
It reduces portfolio volatility (protect) and relieves some of the pressure from risk assets of always having to perform at peak levels which fits neatly within our Ethos to Protect and Prosper
So hopefully you’re starting to understand the significance of the message. The critical importance of looking at things from a different lense. As we continue in the Long Tail Risk pocket, you’ll see how I am building upon this message of protecting as well as to prosper.