The current anxious investment environment will eventually pass. While that may be of little consolation, it is a future point of focus that should not be ignored. Sharp market declines and high volatility, the likes of which we are now experiencing, cause many of us to hyper focus on the value declines in our portfolios; be they retirement accounts or personal, taxable accounts. We tend to see plans for retirement melting away, our net worth contracting and a general feeling of loss.
Whenever money is invested, there really should be stated goals for it – whether for retirement, an upcoming purchase, forced savings, etc. Whenever we do financial planning for our clients, we try very hard to elicit from them their reasons for risking capital. Some will say that they hear that everyone should be in stocks. Others will say that they feel “wealthier” when stocks are going up and “devastated” when they are heading way down. Those two responses tell us that the pain of loss is far greater than the euphoria of gain. Where do you fall within that range of emotions?
In order to take control of one’s financial/investment destiny, we carve up our clients’ savings and investment dollars into several buckets, if you will. We separate goals and tailor plans to help clients reach those various goals or have a high probability of doing so. Some level of discipline is essential.
Targeted goals out just a few years would be accompanied by a portfolio(s) that emphasizes lower returning/lower risk investments that fluctuate little in value yet still have a positive return bias. The more years out the greater degree of risk that typically can be assumed. It is this latter group that would be well served to focus on the future and not make too many near-term moves that are very much driven by daily news events, fear and crowd psychology. Of course, if one can’t sleep at night, as they say, then perhaps some self insight and a reality check are in order.
To be sure, giving fine tuned investment advice is way premature to addressing the more important issues like the goals and time horizon items noted above. Of course, we all want to get back to better times when the system works and we expect more to be on track to achieve our future goals and aspirations. In my years in the business, I know there are no secret formulas, no hot investment trends that last forever, and no one else to take charge of our financial lives other than ourselves coupled with trusted professional advice.
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