Now Is the Time to Ask: How Much Market Risk Can You Take?

Now that the stock market has momentarily stabilized from the shock of President Donald Trump’s “Liberation Day” tariffs, investors have an opportunity to reflect on how their portfolio held up during the past two turbulent weeks. If it sank more than they expected, there may be greater risk lurking there than they want or can tolerate.

People don’t think about risk much in a rising market. And when they do, they don’t focus enough on the essential question: How much of my money will evaporate in a crisis? The answer is more than you probably think, which explains why many investors were surprised by the depth of the declines during the 2008 financial crisis and the Covid pandemic — or even following Trump’s tariff announcement on April 2.