Are you approaching retirement and concerned about protecting your life savings from market volatility? In this comprehensive episode of the Tom Dupree Show, Kentucky retirement planning advisors Tom Dupree and Mike Johnson explore the multidimensional nature of investment risk and why personalized investment management is essential for pre-retirees aged 50-65. Unlike mass-market approaches from large firms, Dupree Financial Group provides direct access to portfolio managers who understand your specific retirement goals and risk tolerance.

This evergreen financial education episode delivers timeless wisdom on risk assessment, portfolio protection strategies, and why understanding what you own is critical before retirement. Whether you’re working with a local financial advisor in Kentucky or managing investments on your own, these insights will help you make more informed decisions about your retirement security.

The episode draws heavily from Howard Marks’ influential 2006 memo on risk, which Tom and Mike have studied extensively. Marks, co-founder of Oaktree Capital Management, challenges conventional thinking about risk and return relationships.

“If more risk always meant more return, it would cease being risky. The risk would be riskless,” explains Mike Johnson, highlighting the fundamental misunderstanding many investors have about the risk-return relationship.

The discussion emphasizes that bearing risk unknowingly represents one of the biggest mistakes pre-retirees can make. This is particularly relevant for those who have experienced strong market performance for years without understanding the volatility embedded in their portfolios.

Tom Dupree shares a cautionary tale that every pre-retiree should hear:

“There was a man that came to me years ago who had been at UK for a number of years. He had invested in Fidelity and TIAA-CREF, good funds, great returns. He had something like 1,000,006 and he had averaged 13 and a quarter percent return per year for like 23 years. He extrapolated that he could take 10% a year, which was $160,000, live on it and be okay because it was gonna keep doing that. The sequence of returns turned around and bit him good.”

This example perfectly illustrates sequence of returns risk—a critical concept for anyone approaching retirement. Even with excellent average returns, the timing of market downturns relative to when you need to withdraw funds can devastate a retirement plan. This is why personalized investment management from a local financial advisor who understands your specific timeline is so valuable.

The episode challenges the traditional definition of investment risk as merely volatility. For pre-retirees and retirees specifically, Mike Johnson explains:

“The base case that we’re trying to solve here? We’re speaking specifically to near retirees and retirees. Volatility is gonna be your friend or your foe the day you need to take your money out. That’s gonna be your definition of risk—what has the volatility done to my money the day I need it.”

One of the most powerful concepts discussed is how prolonged positive market performance can numb investors to risk—exactly when they should be most vigilant.

Mike Johnson references Nassim Taleb’s “Fooled by Randomness” to illustrate this danger:

“Reality’s far more vicious than Russian roulette. First, it delivers the fatal bullet rather infrequently, like a revolver that would have hundreds or even thousands of rounds instead of six. After a few dozen tries, one forgets about the existence of a bullet under a numbing false sense of security. One is thus capable of unwittingly playing Russian roulette and calling it by something alternative: low risk.”

This perfectly describes the situation many pre-retirees face today after years of strong market performance. The analogy to driving at 90 mph—where you stop feeling the speed—resonates powerfully. You’re taking significant risk, but you’ve become accustomed to it and no longer perceive the danger.

Unlike large firms where you’re assigned an investment counselor who may change frequently, Dupree Financial Group provides direct access to portfolio managers Tom Dupree and Mike Johnson. This relationship-focused approach enables:

“When our clients understand what’s in their portfolio and why, they don’t call us panicking when the market drops,” Tom Dupree emphasizes, highlighting the value of education and transparency in financial relationships.

The episode delivers a sobering message about the limitations of index fund investing for retirees:

“If you don’t like risk and you think that you’re not taking any risk by investing in the S&P 500, sweetie pie, you need to get in the money market fund and just hope you got enough money to ride through it because you are taking risk that you don’t know about. And that is a problem because you’re gonna find it out in a very uncomfortable way at some point.”

This doesn’t mean index funds have no place in portfolios, but rather that they shouldn’t be confused with a comprehensive retirement income strategy. Personalized portfolio analysis considers:

For younger investors just starting out, Mike Johnson offers this perspective:

“If somebody’s in their late twenties, early thirties and they have a few stocks here and there, that’s great. You’re ahead of the curve from a lot of people, but that is not a portfolio. What you want to do is lay a foundation that’s more sturdy, more solid than just having a few stocks here and there.”

This guidance is equally relevant for pre-retirees who may have accumulated individual positions over time without a cohesive strategy. Kentucky retirement planning requires transitioning from an accumulation mindset to a distribution strategy—and that requires professional portfolio architecture.

One of the most important insights for pre-retirees:

“Remember, it’s not just the accumulation, it’s not the dollar amount, it’s what it’s gonna produce for you and how long can it produce that to sustain you. Retirement has the normal set of rules plus other variables that you have to take into consideration.”

This shift in perspective—from portfolio value to sustainable income—is where personalized investment management becomes critical. Every individual’s situation differs slightly, and those differences matter enormously in retirement planning.

Tom Dupree introduces an often-overlooked dimension of investment risk: the role of faith. Not just faith in markets or historical returns, but a deeper consideration of existential risk and what you ultimately trust.

“Underpinning any investment scheme is faith. At the base of everything related to risk is faith. You cannot get away from it. One of the things about the God factor is that it takes certain elements of risk that you’re willing to take on for yourself and transfers them to a higher power.”

While this dimension is personal and not emphasized in typical financial planning, it reflects Dupree Financial Group’s holistic approach to understanding clients as people—not just portfolios.

The biggest risk for pre-retirees is sequence-of-returns risk—experiencing market downturns just as you begin withdrawing from your portfolio. Even with strong average returns over time, poor returns in the years immediately before and after retirement can devastate your retirement security. This is why personalized retirement planning in Kentucky focuses on more than just average returns.

For retirees, risk is primarily defined by volatility’s impact on withdrawals. When you need to take money out during a market downturn, you crystallize losses and reduce your portfolio’s recovery potential. Younger investors have time to recover from volatility. As Tom Dupree explains, “Volatility is gonna be your friend or your foe the day you need to take your money out.”

Index funds are not inherently “safe” for retirement—they carry significant volatility and concentration risks (especially in large-cap tech stocks right now). While they can be part of a retirement strategy, they should not be confused with a comprehensive income plan. Local financial advisors can help design strategies that balance growth needs with income stability.

There’s no universal answer—withdrawal rates depend on your portfolio composition, risk tolerance, retirement timeline, and income needs. The gentleman in Tom’s example assumed 10% annual withdrawals based on historical 13.25% returns, which proved disastrous. Personalized portfolio analysis determines sustainable withdrawal rates specific to your situation.

Local advisors like Dupree Financial Group provide direct access to portfolio managers who personally manage your investments, rather than being assigned to a counselor who may change. You receive personalized service, education about your holdings, and strategies tailored to your specific goals—not mass-market approaches. Tom emphasizes: “When our clients understand what’s in their portfolio and why, they don’t call us panicking when the market drops.”

Knowing what you own means understanding not just the names of your holdings, but the specific risks each position carries, how they work together, and why each was selected for your situation. It means knowing what could go wrong with each investment and having conviction in your overall strategy during market volatility.

Pre-retirees should review portfolio risk at least annually, and more frequently as retirement approaches. Risk tolerance, time horizon, and income needs change as you near retirement. Kentucky retirement planning professionals continuously monitor holdings for emerging risks and rebalance as needed.

Concentration risk occurs when your portfolio has too much exposure to a single stock, sector, or asset class. Many investors have unknowingly accumulated concentration in large technology stocks through both index funds and individual holdings. If that sector declines, your entire portfolio suffers disproportionately. Diversification addresses concentration risk.

Signs you may have excessive risk include: heavy concentration in stocks after years of strong returns, high portfolio volatility relative to your withdrawal timeline, lack of income-producing assets, or simply not understanding what you own. A complimentary portfolio review with Dupree Financial Group can identify hidden risks: call 859-233-0400.

Dupree Financial Group focuses on building long-term relationships with people—not just managing money. The team conducts their own research, provides comprehensive education, thinks independently rather than following the crowd, and designs portfolios around your specific goals. Learn more about their investment philosophy.

Don’t Wait for a Market Downturn to Discover Hidden Risks in Your Portfolio

If you’re retired or approaching retirement, understanding the specific risks in your portfolio is critical. After 47 years in the investment business, Tom Dupree has seen countless retirees discover they were taking far more risk than they realized—often at the worst possible time.

Dupree Financial Group offers Central Kentucky residents a complimentary portfolio review to help you:

Call 859-233-0400 to schedule your complimentary consultation

Or visit us online:

Dupree Financial Group serves clients throughout Central Kentucky, including Lexington, Louisville, Frankfort, Winchester, Richmond, and surrounding communities.

The Tom Dupree Show provides timeless financial education for investors approaching and in retirement. Hosted by Tom Dupree, Jr., founder of Dupree Financial Group, and portfolio manager Mike Johnson, each episode delivers practical insights on investment management, retirement planning, and portfolio risk assessment. Unlike generic financial advice, the show focuses on the specific challenges facing Kentucky retirees and pre-retirees.

Tom Dupree founded Dupree Financial Group on the principle that creating long-term relationships with people—not just their money—is the key to successful wealth management. With direct access to portfolio managers and personalized investment strategies, Dupree Financial Group delivers the attentive service of a local advisor with the knowledge of a seasoned investment team.

Episode Type: Evergreen Financial Education

Primary Topics: Investment Risk, Retirement Planning, Portfolio Management, Sequence of Returns Risk

Featured Guests: Mike Johnson, a member of the team at Dupree Financial Group

Listen to More Episodes: Market Commentary Archive

Help others understand investment risk by sharing this episode: www.dupreefinancial.com/podcast

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