Volatility has been consistent throughout the COVID-19 pandemic. One other constant I have heard is, stay the course. Staying the course during an event like this may very well be the right advice, but I think there is another variable that needs to be looked at to help confirm that this is the right choice. Reviewing how the volatility has affected your plan is an additional component that needs to be reviewed. The plan is paramount in deciding to stay or abandon the course.
Investors mistake making buy/sell decisions for their investments with having a plan for their financial future that will dictate how the investments should be handled. This may seem like semantics, but it is not and there are definitive differences in the way you look at your portfolio and judge when to stay or change your course.
This reminds me of a quote by John F. Kennedy, “The time to repair the roof is when the sun is shining.”. This rings true with your investments and too. Typically, volatile times do not present an ideal time to change or amend your investment strategy or financial plan, you want to address these items when the sun is shining.
You should have a plan in place for your financial future. This plan will act as a roadmap, a guiding light to help you make decisions about your financial life including your investments. Investments are simply one component of your financial plan. The plan will help you make the decisions you need to reach the goals you are aiming towards. Whether you have a plan in place or not, now is the time to look at it or get one in place. This will ultimately provide you with the assurance of staying the course or the suggestion that you should consider adjusting your overall plan
Staying the course, without knowing what the course is, is simply looking at your investments and making an educated guess on where you believe asset prices will be soon. Making decisions based simply on market prices, and not your plan, can cause you to make a bad or wrong short-term decision that can harm you in the long-term.
To effectively determine if and adjustment needs to be made to your portfolio, you want to evaluate market fluctuations in terms of your financial plan and whether your plan is on or off track. This is what will indicate if the fluctuations have caused your plan to veer off course. Making decisions simply about your investments is like driving to a far destination, getting off the highway, and taking local roads the rest of the way because there was a small traffic jam. This may help you avoid five minutes of traffic but will add hours to your trip.
In my work with clients over the last 20 plus years, I have come to realize that most people are not concerned about the change in the value of their portfolios when markets fluctuate, and they see market declines. They are nervous about what it may mean to their overall financial plan and their ability to reach their goals and dreams. Essentially it is not the loss of the money, but what the money will ultimately be able to “buy” them. To be able to evaluate the impact the market fluctuation has on their ability to reach their goals, clients would need to have a financial plan. This would provide them with a clear view of how they will be impacted in both the short and long term.
We would be happy to discuss the recent volatility and how it may be having an impact on your plan. We can also help you get a plan in place so the next time volatility arises you will be prepared. Just contact us, Mitlin Financial, at (844) 4-MITLIN x12 to schedule a time for this review. Be sure to share this article with friends, family, and business acquaintances who might be interested too. We look forward to helping you, and them, get on the right path and stay there.
This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.