How a Financial Plan Helps You Endure Market Volatility
Often, one of the hardest, yet most valuable, things to do during a stressful period is looking at the bigger picture. A financial plan can be a helpful tool in doing just that while the financial markets are performing poorly. Being reminded that well-constructed financial plans prepare for market downturns and unexpected emergencies is a worthwhile action item. This is where your QA advisor comes into play. Having the right supporting resources can decrease the risk of being blindsided by factors that could negatively impact your financial situation.
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Associate Wealth Management Advisor
The Market Has a Mind of Its Own
A key characteristic of a well-designed financial plan is the consideration of market volatility— and for good reason.
For example, let’s say in 2000 you were 55 years old and wanted to retire in a decade. You calculated that your portfolio needed to average annual returns of 6% to reach your retirement goal by 2010.
Unfortunately, after the crash of 2008, that carefully designed portfolio meant nothing. In fact, you probably would have reached 2010 with about the same amount of money you started with (if you were lucky).
Building wealth over time may seem like a futile effort, but a well-designed financial plan can help you brave the ever-changing ebbs and flows of the market.
A Living, Breathing Plan
A financial plan can give you a better idea of how to meet your goals. Any good financial plan is dynamic. People often see their financial plans as fixed in stone. You don’t want to wander too far away from your goals—but goals change. As your goals evolve, your plan must change too.
Life changes can affect your financial goals as much as market changes. You may get a new job, enter a new tax bracket, or buy a home. You may have a baby or get a divorce. You may decide to file for Social Security at the minimum age or postpone filing until the maximum.
Here’s the truth: There’s no way to predict what mix of assets will return 6% a year for the next decade. But you can build a plan that accounts for the different scenarios that life could throw at you.
What Should You Do?
Your best first defense is to be aware of current trends by using the resources you have around you. Keep in touch with your financial professional. With a prudent financial plan and the right supporting resources, you decrease the risk of being blindsided by unexpected factors that could negatively impact your financial situation. Focus on what you want to do with your money—not the trends and noise that could pull you off track.
Another thing that could potentially derail your best-laid plans: emotions. Emotions can distract from goals by driving you to deviate from your plan. Instead of letting market gyrations dictate your actions, look to your plan for guidance.
A good plan that’s carefully laid out in partnership with a financial professional should walk you through various simulations so you make rational decisions well before emergencies arise.
Enjoy the Security a Financial Plan Brings
There’s no way to see into the future, but there’s one thing you can predict: Markets will be unpredictable.
It’s a financial planner’s job to collaborate with you on a thoughtfully designed plan that accounts for any issues that could derail your plan. This allows you to endure the inevitable bad times with confidence.
So if you have a plan, stick with it, and make sure it’s updated as your goals shift. If you don’t have a plan yet and are just focusing on investing advice, you’re potentially missing out on the sense of security that a quality financial plan can provide.
QA and its wealth management advisors do not provide legal, accounting or tax advice. Our advisors have general knowledge of certain matters included in this information, but individual situations may require the advice of licensed legal, accounting and tax professionals.
For more information about QA, its investment programs, fees, and the risks associated with the investments which QA may make or recommend, please review QA’s Form ADV disclosure brochure, which is available at www.QAwealthmanagement.com.