by Richard E. Reyes, CFP
I have developed this message for our clients. Although I responded to you all last Thursday night. I feel it is always important to give you as much information in order for you to be able to “sleep well at night” and continue to have confidence not only in the plan we have created together but the investments that you hold. Remember I am here to deliver confidence.
Now lets face it its been a rough few weeks on Wall Street and Washington. With all the debt ceiling discussion, continued high unemployment, the S&P downgrade, and some data which might be interpreted as slower economic growth in the short-term this all has added pressure and extreme volatility on stock markets globally. As you probably have heard from me in the past, in times like this the media seems to want to over react. But not only is the media a culprit, but money managers and the financial industry itself over reacts too because the bottom line is that fear, pain, and greed sell and my job and what you pay me for is to make sure you stay disciplined to your plan and to keep you thinking long-term.
So I want to make sure to give you four pointers that are important to understand, not only during this period but during really any period of time when you are dealing with investments in the stock market in order to protect your retirement not only now but into the future. I am sure that I sound like a broken record but investing is simple, its people who have problems.
First, I want you to brace yourself but also know that stocks are the best wealth creation tool known to mankind but they are volatile in the short run. You have heard me say over and over again that I can’t tell you where the next 20% move in the market will be and anyone that even attempts to tell you is just plain delusional and a liar. What I can tell you is that it would not surprise us if volatility continues as the markets sort out all the recent data and announcements. But remember: Volatility means price increases as well as decreases, so don’t associate volatility with investment losses. One does not result in the other. None of you have a 100% allocation into the stock market. We have worked together with you to set up a mix of assets that was developed specifically for your needs.
Secondly, proper asset allocation and rebalancing of your portfolio are crucial to making sure you are properly diversified and within your risk tolerance. When constructing a portfolio the idea is always to mix stocks and bonds that will maximize your odds of earning a good return while minimizing the risk. We take this seriously and as you already know your money is allocated prudently and across a global portfolio of stocks and bonds. In addition, it’s important that your portfolio is rebalanced throughout the year both when times are good and when times are bad. What does this mean, well right now the market is down and if at the end of the quarter the market continues to be down we will be selling the fixed income portions of your portfolio and systematically and with discipline buying into the stocks portion of your portfolio. Believe me when I tell you that no one is doing this since it is contrary to our very nature.
Third, if you’re not yet retired, invest more. As everyone learned from the 2008 credit crisis, the time to invest is while prices are low, during periods of uncertainty. This is the best buying opportunity we’ve had in nearly a year, so we encourage you to exploit the situation to your advantage. Don’t follow the guy/gal in the cubicle next to you. Continue adding to your portfolio.
Fourth, if you are retired and you are one of our clients, you should not be concerned. Your income plan was put together exactly for times like this. Since we know that we can’t control the markets, we don’t allow your income to come from the market. As I have said before we know that over the long-term exposure to stocks works very well but there will be bumpy roads in between. Although you have exposure in the market we have pushed the risk of those investments out over time (the next 15, 20, to 25 years) in order for u to achieve reliability of income and be better able to manage your emotions at retirement. However, it is always a good idea to review your withdrawals and income needs with us.
Finally, lets remember to stay focused. The job of any investor is to think long-term. This of course goes against every instinct and emotion you will have because we are hard wired to panic, become emotional and only focus on the next 30 minutes not the next 30 years. The need to save for college and retirement, and to maintain your income if you’re already retired, remains unchanged.
So if you are still shaky and unsettled about this time – Don’t be. Remember your plan and portfolio is developed for the next 15, 20, 30 years and is structured just for times like this. So let’s ignore what’s going to happen in the next couple of days and even the next upcoming weeks. Know that this country and even world has gone through a lot worse times that we are facing today. We have been through world wars and massive depressions. And yes times are tough, crazy, insane but just like before we come out of this because in the end free markets and capitalism works. Know that life goes on. Entrepreneurs and companies will continue to find ways to innovate and make profits. So relax, enjoy your life and we will continue to stay disciplined.
If you are looking for a brief, plain-English introdution to investing, don’t forget to BUY my book, Dirty Filthy Lies My Broker Taught Me & 101 Truths to Money and Investing. Order my book now and I will also send you my Investor Awareness Guide and listen to our The Seven Deadly Investor Traps that Destroy Your Wealth and the Three Power Strategies to Fix Your Portfolio Fast! These materials will equip you with the information you need to begin putting your investment experience back on track.
Wealth and Business Planning Group, LLC (The Financial Quarterback™) is a Registered Investment Advisor in the State of Florida that provides Fee Planning and Asset Management. Depending on your state of residence, Wealth and Business Planning Group, LLC (The Financial Quarterback™) may not be able to immediately provide services. For more information go to www.thefinancialqb.com. Richard E. Reyes, CFP is an Investment Advisor and President of Wealth & Business Planning Group, LLC (The Financial Quarterback™).