Keeping up March Madness…into April

I probably don’t need to restate the impact that current global events and economic policy changes are causing. I’m also certain that not only have you been receiving non-stop coverage from your own news outlets, but you’ve been feeling the effects of these economic changes in your pocket book as well.

It is at these times that it may be beneficial to reframe (not restate) the situation and how you might benefit from taking a proactive approach to address it head on. I also encourage you to reach out to discuss your concerns when you feel unsure about your investments in light of what is going on.

For starters, if you are panicking about the potential for a drop in your portfolio’s value…please call me! I am always available to discuss your concerns and find solutions to address it/them. But first, let’s take a refresher on investor basics. Investment objectives (yours included) start out with a timeline and purpose. And the answer to these questions determines how much risk we should assume with your account.

We know that the market (your investment value) is going to go up and down during your investment period, and we also know that a correction (decline of 10% or more) or even recession (two consecutive quarters of economic decline) is possible. Right?

What we don’t know is when this will occur, or for how long. That last part is what makes long-term investing difficult for some investors who begin to question their strategy only during downturns in the market. And that may be due to the fact that investors don’t complain when their investments rise in value…as that seems normal and expected.

While past performance is not indicative of future results, it tends to repeat itself. Based on the infamous data collection from Ibbotson Associates Inc. from 1926 to today they have compiled a chart that attempts to put investing into perspective. Here’s their chart that shows how $1 grew over the past 95 years if was invested in stocks, Municipal bonds, Government bonds, or Treasury bills.

What puts this chart into stark reality is the fact that it shows the “real rate” of return against inflation. The real rate of return is what is actual growth after accounting for inflation, and inflation is front and center news right now. So that makes it a very relevant chart.*

For all your other financial matters, here’s a simple checklist that can help you manage your money. Feel free to pass it on.

  1. Just Plan. Critical for long-term success, your financial plan doesn’t need to be complicated, but it should provide a starting point and create a baseline for measuring your goals.
  2. Just Invest. Invest early to maximize your returns. Consider low-cost, broad-based index funds to diversify holdings, reduce management expenses and mitigate tax consequences.
  3. Just Budget. You have to know exactly how much you need per month to live. The easiest way to create a budget is to track what you earn, save and spend.
  4. Just Plan for Retirement. It’s never too early to start saving for life after work. Make regular contributions to retirement accounts, like 401(k) plans, for tax-deferred growth.
  5. Just Eliminate Debt. Reduce debt as early in life as you can, and by retirement if possible—you’ll find it easier to achieve your goals without debt hanging around your neck.
  6. Just Cut Fees. Physically review all financial statements and bills, looking for hidden fees that you can eliminate.
  7. Just Look. Monitor your brokerage statements and 401(k) account to ensure you are on track for retirement. It is always a good idea to overestimate your needs.

According to reports from CNBC, 75% of Americans are going it alone, without the help of a financial advisor.1 To achieve their goals, everyone should have a financial advisor. But not just any advisor – a good one, and the right one for you. Give us a call if you would like to start a conversation about your goals. Just do it!

*Stocks are represented by the Ibbotson Large Company Stock Index. Municipal bonds are represented by 20-year prime issues from Salomon Brothers’ Analytical Record of Yields and Yield Spreads for 1926–1985 and Bloomberg Barclays Municipal Bond Index thereafter. Government bonds are represented by the 20-year U.S. government bond, inflation by the Consumer Price Index, and Treasury bills by the 30-day U.S. Treasury bill. An investment cannot be made directly in an index. Ibbotson Associates is now owned by Morningstar Inc.