Dealing with Stock Market Volatility
Tim discusses stock market volatility and advises clients to remember the purpose of their investment portfolio - to create a reliable income stream in retirement.
Today we're going to talk about stock market volatility. You may have noticed a bit of volatility in the stock market recently. It's times like these that it's important to remember that this is the price we pay for long-term results. If everything went straight up, markets wouldn't mean anything because we would have no sellers and, therefore, no markets.
On average, stocks experience a pullback or 'correction,' in industry lingo, of 10% or more at least once per year - which happens even in positive return years. And yes, it seems to happen extremely fast these days.
Maintain a Long-term Focus
The most important thing to remember is that we are in this for decades- not a week, not a month, not a year or even a couple of years. We are using the stock market as a tool for retirement.
Rather than focusing on the rise and fall of your investments, try to focus on what the purpose of your investment portfolio is actually for. That purpose is to create an income stream in retirement. It is not to simply run up the proverbial score or see what top number of a nest egg we can hit, or at least for most people!
The War Chest for Clients
Recall, if you are a client at my firm, you have a 'war chest' of cash and fixed income that acts as a ballast for your investments. So, while those investments may not go up as much as growth-oriented investments in a rip-roaring bull market, they provide stability and a means of stable cash for many years- while the growth investments go up and down or bounce around.
While my crystal ball doesn't work all that well, I know what we need to do over the long haul to get results - and yes, we are always keeping an eye on everything, and we make decisions on what might be best for your specific situation at that time.
The best advice I can give is to have a plan and stay the course. Panic is not a plan. Panic is not a strategy.
Analogy from Carl Richards
Now, the following message is a great storm analogy from Carl Richards of Behavior Gap.
Imagine it’s a very still day, and you’re in a boat on the ocean.
There’s no wind.
No swell.
The water is as flat as a mirror (or glass as it's known to water sport enthusiasts).
The calm goes on just long enough for you to start to feel like it's normal.
Then a small wave comes… it feels huge. And then another...
And then you’re shocked at how enormous a regular wave feels.
As scary as it might feel… it’s important to remember that waves are normal.
In fact, occasional storms are normal.
And the last thing you want to do when you get into a storm is abandon ship.
Bottom Line
So, let's stay the course, even when the markets might not look so good. And remember, your "war chest" is built to help survive the proverbial "storms."
A CERTIFIED financial planner™ professional can help you plan for your retirement. Schedule a call today so we can talk about your situation.