In this post, let's dive into the concept of shallow risks in investing—a surprisingly misunderstood topic that causes way more stress than it should.

What Are Shallow Risks in Investing?

The idea of shallow versus deep risk in investing was coined by Dr. William Bernstein—yes, a fellow physician and a highly respected voice in the personal finance world. He's written some incredible books on investing that I highly recommend, but one of his most powerful contributions is this framework of separating investing risks into two camps:

1. Shallow Risk
2. Deep Risk

We've talked a bit about deep risks. But here, we’re focusing on shallow risk—the kind of risk that gets all the media attention, spurs all the fear, but is actually the least dangerous to long-term investors.

So… What Exactly Is a Shallow Risk?

Shallow risk refers to risks that feel scary but ultimately don’t have lasting consequences if you’re investing the right way—meaning passively, long-term, in low-cost, broadly diversified index funds.

These are events that get headlines like:

• “The Dow drops 800 points in a single day!”
• “Is this the start of a new market crash?”
• “Tech stocks tumble on weak earnings!”

Scary, right?

But these headlines are mostly noise for long-term investors. Because shallow risks—like short-term volatility—are temporary. They can make your portfolio look ugly for a while, but they don’t cause lasting harm if you stay the course.

Here’s a quick example:

If the market drops 2% in a day and you panic-sell your index funds, that’s when you turn a shallow risk into a real loss. But if you ignore it, stay invested, and let time do its thing, that 2% drop becomes a blip on the radar.

Common Shallow Risks That Scare Investors (But Shouldn’t)

Let’s talk about some of the most common shallow risks that trip people up:

1. Short-Term Volatility

This is the big one. The stock market will go up and down. Sometimes a little, sometimes a lot. But historically, the market has always gone up over the long term. If you're investing money that you don't need for decades, who cares what it does next week?

Volatility is just the price of admission for long-term growth.

2. Market Timing & Headlines

Trying to time the market is the classic amateur mistake. You hear news that a recession might be looming or a correction is overdue, and suddenly you’re tempted to pull your money out or make a change.

But here's the thing: no one can predict the market. Not economists. Not fund managers. Definitely not your favorite financial YouTuber. That’s why index investing works—it ignores predictions and just rides the wave of human economic progress.

3. Stock-Specific Data (like PE Ratios)

Investors often get lost in the weeds of technical metrics like price-to-earnings (PE) ratios, earnings forecasts, or moving averages of individual stocks. But if you’re passively investing in the entire market, these things don’t matter. You're not betting on one company—you’re betting on human ingenuity as a whole.

And historically, that’s been a very good bet.

4. Bear Markets and Corrections

Markets go through cycles. A 10% drop is a correction. A 20% drop is a bear market. These are normal, healthy parts of investing. They feel painful in the moment, but they’re temporary setbacks. The danger comes when you react emotionally.

Again, stay invested. Keep your costs low. Ignore the noise.

Why Most People Focus on Shallow Risks of Investing (and Why That’s a Problem)

If shallow risks aren’t really that dangerous, why do we worry about them so much?

Well, part of it is human nature. We're hardwired to respond to short-term threats. And part of it is the media. Financial news outlets, social media influencers, even some podcasts and books—they need you to feel like there’s an emergency every day.

Why? Because fear sells.

If the headline reads, “Don’t worry, just stay the course and keep investing in index funds,” no one clicks. But if it says, “This ONE THING could destroy your retirement plan,” suddenly you’re reading. And worried. And maybe making rash decisions.

But here's the truth: long-term investing is boring, and that’s a good thing.

My Favorite Response to Market Panic

When someone comes up to me and says:

“Jordan, the market dropped 2% yesterday. Is this the start of another crash?”

I usually smile and say:

“I don’t care.”

Not to be rude—but because I genuinely don’t care. My investment plan hasn’t changed. My money is still in broadly diversified, low-cost index funds. I’m not planning to touch it for decades. So, what happens this week doesn’t affect me.

Most people look at me like I’m crazy. But when I explain it, sometimes it clicks. More often, they go back to panicking because that’s what they’ve been trained to do.

Still, I love having that conversation. Because once you truly understand shallow risk, it gives you this incredible peace of mind. You no longer feel like the market is this chaotic, dangerous place. You start seeing it for what it is: a powerful engine of wealth creation over time.

The Key to Overcoming Shallow Risk? Your Strategy

Here’s the bottom line: Shallow risks only matter if you let them.

If you’re investing short-term money in volatile assets, or trying to pick hot stocks, or timing the market—then yes, shallow risks can derail your plan.

But if you’re doing the following, shallow risks are just noise:

• Investing passively
• Using low-cost index funds
• Staying broadly diversified
• Thinking long-term
• Automating your contributions

If this is your approach, you can safely ignore short-term volatility, headlines, PE ratios, and the rest of it.

You’ve already won.

Wrapping It Up

Most of what people worry about day-to-day in investing—those stomach-churning headlines and swings in stock prices—are shallow risks.

They feel big. But they’re not.

And once you realize that, it’s incredibly freeing.

You can stop reacting. Stop panicking. And start focusing on what actually matters: building wealth over time with a smart, simple, consistent investing strategy.

What do you think? Do you worry about the shallow risks of investing? How do they impact your investing strategy? Let us know in the comments below!