FRANKLYWNOW - Lesko: Is Making Too Much a Sign of Risk?

Lesko: Is Making Too Much a Sign of Risk?

Jason: You might think the sky's the limit when it comes to making money from stocks. But Greg Lesko of Lesko Financial says making too much is as much of a concern as making too little. Greg...

Greg: Thanks Jason. Anyone who had money in the stock market last year is likely pretty satisfied with how they did. The market hit historic highs and those who invested in it probably saw gains in the high single digits.

But, if you had returns that were much, much higher, before celebrating, you might want to consider why your stocks did so well. It could be the result of a risky approach.

Jason: What kinds of risk?

Greg: Nobody can predict where stocks will be at the end of the year--or even at the end of the month. Too high a return might have been the product of guesswork--or pure luck.

Maybe you had too much invested in stocks, which exposes you to the risk of losses if the market turns volatile. Where was your "downside protection?"

Jason: What is "downside protection?"

Greg: That means having investments that don't go the same way the stock market goes. So when the markets go up, you'll have some investments that go down.

Jason: That doesn't sound like something that would make investors happy.

Greg: But it really is the only way to protect the money you've worked so hard to save and then invest. It's what we call a "well balanced mix"- -and it usually means more modest returns.

But it also allows you to sleep better, without worrying about big losses if the market starts to go down. So it's a sound investment strategy.
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