Hurricane Alpha?
Really? It is only September and the National Hurricane Center is about to run out of names. After Alfred through Wilfred, we move on to Alpha, Beta, and Gamma. As the outer bands of Hurricane Sally churn the Gulf of Mexico outside my window, I can’t help but think this hurricane season seems an appropriate metaphor for 2020: so many storms that we’re running out of names to give them.
Beyond hurricanes and tropical storms, we’ve all weathered more than our fair share of challenges this year. Almost every aspect of our lives, our work, our families, and our finances, has been turned upside down. It’s enough to make you wish you could just hit the snooze button and pull the covers up over your head until 2021.
From a financial planning point of view, if you have a decade or longer until you need your investments to fund retirement or other goals, hitting the snooze button might actually be your best plan. If you’ve made proactive decisions about your savings and investments, based on your goals and planning horizon, you can wait this storm out, too.
Just as a hurricane emergency plan helps us prepare for dangerous storms, a good financial plan will both address the most likely scenarios and provide a foundation for dealing with the unexpected. Thinking through the possibilities in advance ensures you make proactive – rather than reactive – decisions when the unexpected happens.
That’s the main goal of working through the financial planning process: to build a plan that gives you the best opportunity to reach your goals with the least amount of risk. We can’t eliminate risk any more than we can control the weather; but we can anticipate market volatility, we can stress-test potential courses of action, and we can optimize your probability of success.
That’s real financial planning. And while investments are only one piece of a comprehensive financial plan, working through the process can set you up for success when the market inevitably churns. A financial planner can guide you through the following investment management steps:
Identify your goals, planning timeline, financial assets, and risk capacity.
Determine the appropriate asset allocation, balancing the higher risk and returns of stocks with the relative safety of bonds and other cash-like assets.
Select a diversified portfolio to mitigate the impact of any one investment or asset – a process that becomes even more important if you earn company stock or equity compensation.
Rebalance your portfolio at regular intervals to maintain an appropriate level of risk as the market changes and your goals evolve.
A financial planner who understand your values and goals is a partner in navigating calm and stormy seas, ensuring you are prepared for even the most challenging times.
