Why Stocks Are Riskier Than You Think
From the Wall Street Journal
By Zvi Bodie and Rachelle Taqqu
Video from WSJ.com
March 12, 2012
A growing sense of urgency is driving many investors to take reckless risks with their money.
Even though they experienced the hazards of stock ownership firsthand in 2008, investors are venturing back into equities again. They’ve been advised that there’s no other way to make up the losses they suffered—or meet their looming retirement requirements—and, not to worry, the risk of stocks diminishes the longer you hold them. The Federal Reserve, meanwhile, has announced that it intends to keep interest rates low through 2014—providing a powerful inducement to stay in stocks since bonds will probably generate unusually low returns.
The desire to get back what you lost is understandable. But, as behavioral economists have shown, it can also cloud your judgment and lead you to take more risk than you can handle.
Read the full article here.