You Are Not Taking Enough Risk
You have mastered risk. Every shift, every call, every decision you make is a calculated assessment of danger and reward. And yet when it comes to your financial future, that same instinct that keeps you alive is quietly working against you. First responders (fire, police, EMS) are in the business of risk reduction. This is anything from wearing the appropriate personal protective equipment to reduce exposure to carcinogens and harmful chemicals, bullet-proof vests, or respiratory protection to prevent the transmission of bacteria or viruses. Risk reduction is also evident in reducing public risks to hazards by intervening appropriately and mitigating dangerous situations. This is why we have careers; this is why we are professionals. And we are very good at the business of risk management. By diligently being self-aware, practicing, and having each other’s backs, we are becoming more resilient to the hazards that are present around us which in turn is paying dividends in our life expectancy and life quality. But have we gone too far? Has this mentality of being professional risk reducers inhibiting our ability to achieve our financial and life goals? Is constantly being aware of risk creating unconscious biases that prevent us from taking any? The goal of this blog is to explore the asymmetrical relationship between first responders and defined benefit pension holders alike and their lack of risk taking in the equity markets. This blog will educate the readers on why risk taking is important, how to assess your risk, and most importantly, how to start investing.
Assessing risk correctly is critical for safety in the first responder sphere[1]. It is imperative that each individual does this so that they and their crewmates return home safely after every shift. But being a risk reduction mentality first has its detriments. Because of this mentality or because many professional first responders are public servants who are drawn to the stability and teamwork environments that public service offers (or a combination of both) there is a gap in risk taking with work and with your personal matters, namely investing. This is not particularly surprising considering the personality traits that are more likely to occur in public servants compared to their private counterparts[2]. For example, public servants value job-security, teamwork, and consistency, whereas people in the private industry are seen as competitive and innovative. It is unsurprising that public servants are the personality types that value roles with defined-benefit pensions which offer secure and consistent returns (much like a bond). We then should not be surprised that a private sector person is likely to participate in equity markets as a means to save for retirement with the common practice of stock-based compensation[3]. However, logically this makes little sense why a person in the private sector is more likely to engage in risk-taking activities such as investing in the stock market compared to the public servant. The private sector person has more to lose as their job security isn’t as high compared to public servants (although the recent layoffs in the US and Canada for federal employees shows the vulnerabilities of public service)[4]. It would make more sense for a person with a statistically higher level of job security, combined with the security of a defined-benefit person to have the higher risk tolerance regarding investing as the downside risk to losing is significantly less than a person in the private sector. Beyond Your Pension aims to solve this problem. The amount of risk someone with a defined-benefit pension should increase. The rise in risk tolerance should be in accordance with each individual person; however, it should be higher than it is now. There could be several factors for which a person with a pension doesn’t concern themselves with the stock market. However, job security, a defined-benefit pension should not inhibit a persons drive for greater financial security which will allow them to achieve their highest potential and dreams. Beyond Your Pension will be an education asset to help guide a complete investment beginner into someone who invests with intention and consistency. It does not matter if you are disinterested in investing, the stock market, or risk taking. Your future self will thank you for starting. Speaking of which, getting started will be the next post. Arguably one of the most profound and important decisions of your life.
Benton is a first responder, master’s degree holder in risk reduction, stock market enthusiast, and the found of Beyond Your Pension.
[1] Yung, M., Du, B., Gruber, J., Hackney, A., & Yazdani, A. (2022). Fatigue measures and risk assessment tools for first responder fatigue risk management: A scoping review with considerations of the multidimensionality of fatigue. Safety science, 154, 105839.
[2] Dufault, A., MacDonald, K. B., & Schermer, J. A. (2023). The public sector personality: The effects of personality on public sector interest for men and women. Administrative Sciences, 13(7), 158.
[3] Mehran, H., & Tracy, J. (2001). The impact of employee stock options on the evolution of compensation in the 1990s.
[4] Farber, H. S. (2010). Job loss and the decline in job security in the United States. In Labor in the new economy (pp. 223-262). University of Chicago Press.
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