Now’s the time to teach young investors about risk, before the market does it for you

Now is a great time to teach the next generation about the risk versus return relationship and a great way to begin is involving them in meetings with the family’s wealth manager.Illustration by Chloe Cushman/National Post files

When markets enter the later stages of a bull run — as appears to be happening now — it isn’t unusual for investors’ perception of risk to shift, especially when “buy the dips” becomes a common mantra and volatility is being compressed.

In our own interactions over the past few months, however, we’ve noticed that this perception of risk varies dramatically depending on demographics, with those who have experienced a market correction or two remaining a lot more cautious than those who have just started investing over the past 8 or 9 years.

In particular, the vast majority of older investors at or near retirement age are simply looking to generate a reasonable return while protecting their capital instead of trying to keep up with the market. While our typical client has a high net worth and therefore a greater ability to take on risk, we’ve noticed that their willingness remains moderate despite all the euphoric headline reporting.

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