This article was originally published in our weekly newsletter.

Ray Dalio, a famous fund manager, once said:

“If you are not aggressive, you are not going to make money, and if you are not defensive, you are not going to keep money.”

The principle rings true, but how is it applied?

Diversifying your assets by objectives.

Nothing does everything well.

However, keeping all your money in cash and cash equivalents (such as money market accounts, CDs, etc.) for an extended period can be detrimental.

These investments and products may not have market risk, but they do have inflation risk.

On the contrary, keeping all of your money in the stock market (stocks, ETFs, Mutual Funds, etc.) can also hurt you.

These investments and products carry market risk, sequence of returns risk (the risk of taking income from an account that has lost money, which accentuates the loss and makes it more difficult to recover), and additional risks.

What if you built a plan and a portfolio that protected some assets while allowing other assets a longer-term time horizon to grow?

What would that look like?

Context is king.

Your plan provides the context.

The portfolio should be built to support your plan.

Segmenting parts of your portfolio based on purpose and timeline can help you approach retirement more strategically, providing you with greater peace of mind.

The Takeaway

There’s no such thing as a riskless retirement.

How much do you have exposed to market risk (how much is in the stock market)?

How much do you have exposed to inflation risk (how much is in cash or cash equivalents)?

Do you have the right blend of investments and products?

Are your lifestyle and legacy goals aligned with your plan and portfolio?