Q&A: Foregoing Future Expected Returns?

A recent change to a client's life needs would normally warrant a reduction in portfolio risk. In doing so immediately, he would forego future expected returns that he paid so dearly for in the last year. Could the severity of the recent downturn justify delaying a risk reduction? EFF/KRF: No. Although the expected market return probably increased over the last year, this is the result of greater uncertainty about future returns and perhaps an increase in the overall level of risk aversion. If your client's circumstances warrant a reduction in risk, an increase in expected return that is caused by an increase in risk is not a good reason to stay in the market.