Risk Is Everywhere. Exposure Is the Choice.

As the new year gets moving, you might feel the urge to “check in” on your finances…not because something is wrong, but because the world feels noisy. Headlines are loud. Predictions are everywhere. It’s easy to feel uneasy even when your long-term goals haven’t changed.

At Paradigm, we believe this time of year is best used for clarity — not reaction. That starts with understanding one of the most important (and misunderstood) ideas in investing:

The difference between risk and exposure.

Risk is everywhere. Exposure is personal.

Risk exists whether we pay attention to it or not. Markets fluctuate. Economies change. Global events unfold. Simply participating in life, and investing, means accepting that uncertainty is part of the deal.

But exposure is different.

Risk asks, “What could happen?”

Exposure asks, “If it did happen, how would it affect me?”

That second question is where the real planning exists.

You likely feel most anxious during market downturns - not because risk suddenly appeared - but because you’re unsure how exposed you really are. When you don’t know your exposure, every headline might feel more threatening than it needs to be.

👉 If you’re not fully confident in how your portfolio is exposed today, a review can bring immediate clarity.

Diversification matters – a lot.

This isn’t about avoiding risk. It’s about deciding how much of each type of risk you’re exposed to, and how those risks work together over time.

One powerful way to see this in action is to look back at the early 2000s, a period often called the “Lost Decade,” when markets experienced multiple consecutive down years.

Picture an investor starting with $2 million and withdrawing $100,000 per year (adjusted for inflation).

A portfolio invested solely in the S&P 500 ran out of money by mid-2016. The early sequence of market declines depleted capital faster than many expected. By contrast, a globally diversified equity portfolio — represented by the Dimensional Equity Balanced Index Strategy — not only sustained those income withdrawals over time, but continued to grow, reaching approximately $5.8 million by the end of 2023.

This strategy is designed as an “index of indices,” providing broad global exposure while emphasizing smaller and value-oriented companies.

Same starting point.

Same market environment.

Very different outcomes…driven by exposure.

Why this matters in retirement

In retirement, the question isn’t whether markets will be volatile. They will be.

You should be asking:

How much volatility am I exposed to?
Where does my income come from during market downturns?
Which risks affect my lifestyle… and which ones don’t?

When your exposure is intentional, market volatility becomes something to plan around, not something to fear.

A calmer way to move forward

Understanding exposure allows you to focus on what can be controlled:

Asset allocation instead of headlines
Diversification instead of predictions
Long-term strategy instead of short-term noise

That’s how planning creates confidence — especially in retirement.

If you’d like to revisit how your portfolio is positioned, or if you’ve never had a clear conversation about your exposure, today is the day. Even a short discussion can help ensure your strategy still supports the retirement you want to enjoy.

👉 Start this year with clarity. Book a review with us.

Here’s to a year grounded in perspective – not panic.