Three times in the last 25 years, financial markets have been buffeted by severe crises that have left countless advisors and their clients reeling. The reason is endogenous risk, and planners need to be aware of it in guiding their clients.

Endogenous risk is the risk that markets may not behave as they normally do because of a change in behavior of market participants themselves. This is in contrast to exogenous risk - that is any risk generated outside of the financial system, like an earthquake. Either may impact a stock or the market, but endogenous risk is much more far-reaching.

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