In the story of Alice in Wonderland, Alice arrives at a fork in the road and wonders aloud which road to take. A smiling Cheshire Cat appears and asks her what her destination is, to which she replies, “I don’t know.” The toothy cat then proffers the only possible response, “Well, then it doesn’t matter.”

While it’s not the type of exchange that might actually occur in our lives, it should, especially as we consider our financial future. For many people, who have yet to clearly define their financial destination, it probably doesn’t matter to them which path they choose, if they choose a path at all. That may be one way to explain why many Americans are not on track to meeting their retirement goals, or worse, why most couldn’t tell you where they stand today in relation to their goals.

In 2016, greater risks on a number of fronts are likely to increase the frequency and magnitude of volatility spikes for investors. 

Essentially, you need risk in order to generate the level of returns you will need to achieve financial independence. However, risks can be managed far more effectively than investment performance. You can’t predict the direction of the financial markets, or which mutual fund will outperform the others; however, you can mitigate risk and even have it work for you through proper asset allocation and portfolio diversification.