As we all know, the stock market tends to ebb and flow – always has, probably always will. This is pretty much the one thing that the market is actually guaranteed to do. So why do we act surprised and react irrationally when we see volatility in the market like we have in recent years? We respond this way because we are not looking at the right benchmark. We need to stop focusing on the Dow, the S&P 500, CNBC, etc. and create our own benchmark.
In 2008, portfolios were down 20-30% (or more) and people said things like, “That’s great! Your portfolio is only down 30% and the market is down 40%.” What do you mean, “That’s great?” In what sense is being down 30% considered a good thing?
In the last few years, we have witnessed the market being down 500 points one day and up 500 the next. What does that really mean? Well, what’s your benchmark? Does this market fluctuation mean that you have to return to work after retirement? Can’t buy that vacation home you have been dreaming of? Can’t afford to foot the bill for your child’s college tuition? Have to spend less in retirement? What does it mean to YOU? We believe your goals and objectives should be the benchmark, not a standard market index. As long as you are meeting your goals and prepared for the future, relax and let the market do its thing.
You can create your benchmark through the financial planning process. A financial plan is not a one-time exercise. It is a process that helps you clarify your goals, create a plan, and take action. The financial plan serves as a roadmap for your future and helps you navigate all of the potential potholes and detours along the way. You and your trusted advisor(s) should review your plan at least once a year to make sure that you are still on track to meet your goals, regardless of what the market is doing.
For more information, visit our website at www.makinglifecount.com or contact Jamie Bosse at 913-345-1881 or firstname.lastname@example.org.