Investing for retirement, or any other objective, always carries risk. There are potential risks specific to 2016 that retirement investors should be aware as the new year approaches. Here are five risks to watch:
The bull market might end.
The current bull market began on March 9, 2009, and has become the third-longest run in U.S. history. There's no rule that bull markets must end at a particular point, but they don't go on forever. Furthermore, stock market risk is always heightened as a bull market progresses.
China's economy affects ours.
In this interconnected world, what happens in the second-biggest economy has an impact on the U.S. economy and financial markets. A slowdown in China's consumer economy and a devaluation in its currency have already hit a number of large U.S. companies.
International markets are uncertain.
Beyond China, other international markets also have an impact on the U.S. Because a well-diversified portfolio includes international exposure, both in developed and emerging markets, changes in those markets would be reflected in those portfolios.
Tragic events have an impact.
The impact of terrorist attacks on our portfolios is secondary to the human toll. However, some sort of major attack would affect our financial markets and your retirement nest egg, at least in the short term.
Interest rates might increase.
An interest-rate increase will affect holders of fixed-income mutual funds, exchange-traded funds and individual bonds. The price of a bond moves inversely with interest rates.