How a financial plan helps you endure market volatility
Your portfolio may be designed to give you the best chance of achieving your financial goals. Unfortunately, the market doesn’t care about your risk tolerance or your goals.
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 10% 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 hear a
hot stock tip—or warning—that you want to act on. 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 10% 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, always 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 always
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 missing out on the sense of
security that a quality financial plan can provide.
Important Disclosure Information
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information. Diversification does not ensure against loss.
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