Shortfall risk is the possibility that you may not reach the investment target that you initially set out to. Previous performance does not guarantee future returns, so you may fall short of your original forecast.
Shortfall risk can be partially mitigated by investing over the longer term, as a ‘bad year’ will have less of an impact on the longer investment. Potential shortfall risks can also be combatted by diversifying a portfolio, as this decreases the systemic risk. However, systematic risk will still remain.
