If you want to protect your health, there’s something else you need to do than just live a healthier life. It is also important to manage your financial risk to protect one’s health. A study from the Journal of the American Medical Association (JAMA) suggests that losing a substantial portion of one’s wealth can be as detrimental to life expectancy as being impoverished. Wealthier individuals tend to live longer due to factors like safer neighbourhoods, better healthcare access, and healthier diets.
Despite these advantages, a significant loss in one’s investment portfolio can negate the benefits of wealth and health. The JAMA study indicates that such losses can increase the risk of death by 50% within 20 years, a risk similar to that associated with a heart disease diagnosis, even when accounting for existing health issues. This risk applies to people regardless of their financial status before the loss.
A quarter of Americans aged 51 and older have experienced a “negative wealth shock,” which is a significant financial loss. To mitigate this risk, follow a “portfolio pre-mortem” strategy that involves envisioning a severe market downturn and taking proactive steps to minimize financial damage. These steps include adjusting asset allocation, favouring high-quality stocks, emphasizing large-cap companies, choosing value stocks over growth stocks, and favouring high-grade bonds over high-yield ones. By implementing these measures, individuals can protect their financial well-being and reduce the stress associated with financial losses, ultimately safeguarding their overall health.