MONEY OBEDIENCE

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When many people think about financial risk, they think of things like the risk of investing and then losing in the stock market ("market risk"). Most people go out of their way to avoid losing money, and so they stay away from the stock market. But, financial risks sometimes are paired with financial opportunities — they just may not always appear in equal probabilities. There can be good outcomes to risk taking behavior — for example, stock prices could go up instead and earn you gains. However, many avoid taking the chance, because to most it feels a lot worse to lose $1000 than to make $1000.

The problem is that if you avoid the risk of the stock market by not investing at all, you are assuming two other major risks you may not be conscious of. One such risk is that your savings could lose hidden value over time by not keeping up with inflation ("purchasing power risk"). The other risk is that you might not reach your financial goals by not making your dollars earn as much as they can.