Risk is any uncertainty that has the potential to negatively affect your financial welfare.
Many think the risk is losing money, But Real Risk is not achieving your financial goals
1. Falling into poverty
To secure long-term goals such as retirement and ensure you don’t prey to the spectre of old-age poverty, it’s imperative to invest. Money left in bank will lose its value
2. Lifestyle will not improve
If the value of your investments does not counter inflation, you may not be clocking an effective real return, which is a risk. Near term or short term required money should be placed in capital safety instruments, while long term money should beat inflation by a huge margin.
3. No other sources of income
Can you work for salary in your retirement period? 85% of the people depend on single income source i.e Salary or Business Profits. Salary / active income keeps you working for money, while portfolio and passive income keeps money working for us.
4. Longevity risk
The risk of living till 100 years or outliving your savings. This risk is particularly relevant for people who are retired, or are nearing retirement.
5. Pension isn’t going to be worth
We hear from parents or grandparents as how many things they could buy during their times with Rs. 50 or 100. However, today, things are different due to inflation that can deplete your savings in no time. Hence plan for alternative sources of income which can be steady, regular, consistent and guaranteed for decades.
6. Will not able to achieve financial goals
Every financial goal whether its near term / medium term / long term, it needs some amount of money. If life goals need to be realised and accomplish with ease then investment is needed. One can never meet long-term high corpus goals with short-term low yielding instruments.
7. Miss Out on the Power of Compounding
Hailed as the eighth wonder of the world, compounding has a multiplier effect on wealth. With a small, regular, consistent, saving of Rs 2000 every month for 25 years, which grows @ 20% per annum can compound to 1 Crore, similarly an investment of Rs 1,00,000 will compound to 1 Crore in 25 years @ 20%. Well, that’s the power of compounding.
Thus, shying away from investing, will lose out the compounding benefit, chance to grow money and can be significant shortfall in the desired corpus for a particular goal.