When most people hear the word risk in investing, they likely think one thing:
Losing money.
It’s why you’ll often hear comments like, “The stock market is basically gambling.”
But is that actually true?
Yes, you can lose money investing. That’s why every financial firm includes those disclaimers. But if we zoom out and look at the bigger picture, the definition of risk becomes a lot more interesting.
What the Stock Market Data Actually Tells Us
Let’s look at some historical context using the S&P 500, a widely accepted benchmark for the overall stock market:
- Since 1928, the S&P 500 has had positive returns about 67% of the time
- There has never been a 20-year period where the market lost money
- Since 1990, the average annual return has been around 9.2%
So what does that mean?
It means that historically, time has been one of the most powerful tools in reducing stock market risk. The longer you stay invested in a diversified portfolio, the lower the likelihood of losing money.
Even when factoring in major events like the dot-com crash and the 2008 financial crisis, long-term investors have still come out ahead.
What This Data Does NOT Tell You
Before we get too comfortable, let’s be clear:
Past performance does not guarantee future results.
We don’t know what the next crisis will look like or when it will happen. Markets react to events we can’t predict.
But when we can’t know the future, we rely on the next best thing:
What has consistently happened over time?
The Other Risk No One Talks About Enough
Everyone worries about market crashes.
Almost no one worries enough about inflation risk.
Inflation is the slow, steady increase in prices that reduces your purchasing power over time. Since 1990, inflation has averaged about 2.48% per year.
That might not sound like much, but over time, it adds up in a big way.
If your money isn’t growing, it’s quietly losing value every single year.
Which Risk Is Greater: Market Volatility or Inflation?
Let’s compare:
- Stock market average return since 1990: ~9.2%
- Inflation rate since 1990: ~2.48%
Now ask yourself:
What’s more likely?
- A permanent loss of your investments over a long period of time
OR - Inflation slowly eating away at your purchasing power year after year
Historically speaking, one of these has never happened over a 20-year period.
The other happens almost every single year.
The Risk You Can See vs. The Risk You Can’t
Market downturns feel scary because they are visible.
You can log into your account and see the drop in dollars.
Inflation, on the other hand, is invisible. There’s no statement showing you how much purchasing power you lost this year.
But that doesn’t make it any less real.
In fact, for long-term investors and retirees, inflation risk can be more damaging than short-term market volatility.
The Emotional Side of Investing
Here’s where things get tricky.
Most people want the same thing:
Growth with zero risk.
Unfortunately, that doesn’t exist.
Every investment comes with tradeoffs.
Even products designed to feel “safe,” like annuities or CDs, can come with:
- Fees
- Liquidity restrictions
- Surrender charges
A well-built financial plan isn’t about eliminating risk.
It’s about balancing different types of risk in a way that gives you the best chance of long-term success.
Final Thought: What Risk Really Means for Your Plan
When it comes to investing and retirement planning, the real question isn’t:
“Can I lose money in the market?”
It’s:
“What risks am I taking by not investing?”
Because while market downturns are temporary, the impact of inflation is constant.
And if your plan doesn’t account for that, you may find yourself cutting back later in life more than you ever expected.
If you’re not sure how your current plan balances these risks, that’s exactly where I can help. Let’s build something that’s intentional, clear, and designed to support your long-term goals.
