When you hear the word “turbulence,” what comes to mind? Could it be a recent trip on an airplane? Or, maybe a flight long ago?
Whenever we fly, a humdrum event is the preferred option. You know, a quick trip through security, an on-time flight, an aisle or window seat, and smooth journey to our destination.
Among investors, we can compare turbulence to a rollercoaster ride in our investment portfolio. It leaves us queasy and longing for the ride to end.
The rollercoaster may lead you to your financial destination, but with it, you’ll experience too much volatility. For many folks, undue market turbulence creates unnecessary worries and interferes with your daily routine.
That’s not what you want. That’s not what we want.
As someone who is the custodian of your financial dreams, we take tremendous pride in seeing you reach your financial destination without pointless risk and turbulence.
The tortoise and the hare
An aggressive approach loads up on risk and will generate excess volatility. It’s not the ideal solution.
However, we believe in a more stable approach – an individually crafted, highly diversified portfolio that manages risk and captures the long-term potential stocks have historically generated.
Think of it this way. A diversified investment portfolio that places you in major industries is akin to a stake in the U.S. and global economy. We don’t know where the economy may be next year, nor do we know where the stock market may be next year.
However, over the long term, the economy has expanded, fueling stock market returns and richly rewarding investors who has adhered to well-diversified, evidence-based plan.
Selectively and wisely incorporating additional assets classes, which might include bonds, real estate, and commodities (what financial advisors sometimes call assets with non-correlated returns), can further reduce turbulence without sacrificing longer-term performance.
Finally, let’s not neglect one other component. The proper mix of low-cost investments that minimizes taxes will pay dividends over a longer period.
Adherence to a financial plan
A well-crafted financial plan is the cornerstone for achieving one’s financial goals. It’s the roadmap to your destination. It’s tailored to your specific circumstances and takes unexpected detours into account.
Unforeseen detours come in many forms. But there’s one common denominator – an unexpected event that’s not collectively priced in by investors can create short-term turbulence.
With a diversified plan, volatility isn’t eliminated, but it is reduced. More importantly, adherence to the financial plan plays a critical role in overall investor success. Besides providing a roadmap, it removes the emotional component that sometimes forces investors into making rash decisions that are rarely profitable.
If you have subscribed to a holistic financial plan that has you on the road to your financial goals, we applaud you. You have chosen the narrow path.
If you feel you have been battered by the waves of financial turbulence, let’s talk. It’s never too late to plan for the future.