There are ways to make retirement less risky.

Risk isn't always where you look for it -- and for successful retirement investing, recognizing and mitigating lesser-known portfolio risks is critical.

We discussed recently two such risks: Why a high-performing portfolio might signal a dangerous lack of diversification, as well as the perils of too-high withdrawal rates.

Here are several more red flags that may signal your strategy could use a second look. Let's begin with risk ...

How many individual companies do you own?

You no doubt noticed this item isn't titled, "How many stocks do you own?" That is intentional, as many folks only consider the number of stocks owned, while overlooking the number of companies owned.

If you only invest in individual securities -- stocks, bonds, etc. -- then determining how many individual companies you own is pretty simple. Just ensure there isn't any overlap (e.g., Apple Inc. stock and an Apple bond), and then count.

But, also, look at the percentages of assets you have in each company. Do you have more than 5% in any one issuer? If so, you may want to reconsider how diverse you actually are.

However, if you are a mutual-fund investor, the consideration is a little different:

  • How many funds do you own?
  • What do they buy?
  • Are they diversified?
  • Does Fund A overlap with Fund B?
  • Do you own many funds, with holdings numbering into the thousands?
    • If so, do you have a strategy for determining your ideal mix of holdings, or do you just "own everything"?

Diversification is a balancing act -- you don't want to tip too far in any one direction.

Are your bonds diversified?

Many investors do not use the same level of care and caution when considering bonds as they do for stocks. They presume bonds are safe and, if they own them, they'll own very few issues in very large positions.

Look at your statements. If you have a million-dollar portfolio invested in individual bonds (not funds or ETFs), getting diversification could be hard. After all, a $50,000 bond position is about as big as you would really want to take in a single issue.

Owning 20 different positions at that level -- not a very large number! -- would mean you are 100% in bonds. Own less than that? Own fewer, bigger positions? You could easily be insufficiently diversified.

Does your retirement-planning strategy include an emergency fund?

Here we go again with something you probably don't think of as a typical investment risk, but most of you should have an emergency fund of cash. You don't need it to be anything extreme, like years' worth of withdrawals, but having a cushion you can easily access and turn to in times of market turmoil is key.

And it may easily help you navigate those tough times, too, to know that you have a cushion to fall back on. Your emergency fund should be off-limits to investment in other assets with volatility risk. Violating this principle defeats the purpose.

Do you have too much cash?

Some folks, though, take the previous item to the extreme, keeping huge swaths of cash idle "just in case" some very unlikely need arises. You have to assess the positive aspects of having a sound emergency fund against the possible negative of carrying too much cash, weighing on your longer-term return.

Always remember: Cash is not risk free. It risks losing purchasing power to inflation, and it costs you the opportunity to earn bigger returns in other asset classes. In the longer run, it is arguably as risky -- if not riskier -- to have too much cash as it is not enough. Always ask yourself: Is my total asset allocation -- cash, stocks, bonds and other securities -- aligned with my longer-term goals? If you don't know the answer, you have a big problem and should talk to your financial professional immediately.

Obviously, there are other factors worth including when assessing your retirement-planning strategy and portfolio. But these points are a good place to start, and considering them could help you prosper this year and beyond.

Fisher Investments is an independent, fee-only investment adviser serving investors globally. To learn more about Fisher Investments, please visit

The content contained in this article represents only the opinions and viewpoints of the author. It should not be regarded as personalized financial advice and no assurances are made the firm will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
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