MY TWO CENTS:
Most of our readers know that we don’t often discuss traditional financial planning topics through this media. The majority of our writings are related to personal development, leadership, or other topics of legacy development. While Legacy Capital Planners, LLC advisors practice financial planning and wealth management, we believe that a sound financial plan combined with the principled execution of that plan should serve your highest priorities as you live your legacy!
That is not just a tag line for us. To help you understand why that’s not just a warm and fuzzy piece of marketing, I intend to delve, ever so gently, into a financial planning topic with this edition of MTC. That topic is market volatility…so buckle your seatbelts!
Have you heard any of these recent news headlines regarding the investing markets?
“Dow falls 150 points as market attempts to rebound from Fed-day rout”
“European stocks hit 2-year low after Fed hikes rates”
“Dow jumps more than 250 points on US-China trade truce”
“Dow ends volatile November with more than 150-point rally on hopes of a US-China trade deal at G-20”
“Treasury yields fall despite US-China trade cease-fire”
“Euro rises on hopes of Italian budget compromise”
If you were a financial news enthusiast and prided yourself on staying on top of the most recent developments, you’d likely find your emotional stability shaken from one day to the next. One day it might feel like the entire world is dark and gloomy, with the next feeling like everything is roses and rainbows. So, what should we do about this in the context of a financial plan developed and executed to serve what really matters in our lives?
First, I like to tell my clients that the investing markets simply don’t care what goals you have, what you’re trying to achieve with your financial plan, or how much income you’d like to be able to take in retirement. That may sound harsh, but the reality is the investing markets are going to do what the investing markets are going to do. Our job is make sure that we understand those markets’ tendencies well enough that we can use them for the purposes necessary to execute your plan.
Second, we need to understand that volatility (of varying degrees) is normal. There are many factors that affect investing markets. Some of these factors are logical and can be understood clearly. Some of these factors are emotional, irrational, and hard to pin-point. Regardless of whether we fully understand the current swings, we need to remember that investing markets will all move up and down.
Finally, we need to understand what role each strategy in our plan is being asked to play. Asking a Major League Baseball starting pitcher to play the role of Offensive Lineman in the National Football League will result in chaos, frustration, and unnecessary pain. The results in this analogy are not dissimilar from the results we get when we ask strategies to play certain roles in the execution of a financial plan that they were never intended to play.
Understanding these three high-level points can help you to temper your response to what the news media is trying to sell every single day. Executing your financial plan with principled investment strategies aligned well for your unique situation can help you develop the confidence to ride through whatever volatility comes. However, buying into the frustration, chaos, and uncertainty being spewed puts us on a bit of an emotional rollercoaster that can keep us from living with joy, peace, and confidence that are key to purposefully pursuing our legacy.
Make it a great week, and have a very merry Christmas!!
Scott Cousino, CFP®