How Much Volatility Before Your Financial Goals Are Impacted?

Volatility is an unavoidable part of investing. One thing we know for sure with our investments is that nothing is static.

The amount of volatility experienced is the result of portfolio positioning, which can range, at a very basic level, from very aggressive to very conservative. The more aggressive you invest the more volatility you’ll experience over time and vice versa.

My question to you, today, is “Do you know how much volatility you can afford before you must reduce your spending or adjust other financial goals?”

If you, or your advisor, don’t know the answer to this question then how can you/he/she possibly know how to invest your portfolio?

After all, the investment strategy MUST be driven by your emotional and financial capacity for risk / volatility. I’ve written about this concept previously here.

If you don’t know your financial capacity for risk / volatility you have no idea how to appropriately invest the assets that you’ve long saved and sacrificed to build up. You could be jeopardizing your financial independence without even realizing it, in which case you won’t realize it until it’s too late to do anything about.

For most my retiring/retired clients, when it is relevant and appropriate, I provide a Retirement Spending Guardrail analysis, which specifically shows the amount of short-term losses that would need to be experienced before an adjustment to spending is needed.

This way clients aren’t flying blind but have a very good idea, even in down years, if their financial goals are being impacted.

Not only does this analysis show the short-term losses that would necessitate a spending reduction, but it also shows the amount of reduction that would be needed to maintain a satisfactory probability of success going forward!

That information, combined with other information, can then be used to craft the most prudent, appropriate investment strategy for that client’s unique circumstances.

The flip side of the analysis is I also show the point at which spending could be increased. The point of this “upper guardrail” is to avoid living TOO conservatively and unnecessarily sacrificing lifestyle, gifting, etc… during our lifetimes.

​We certainly don’t want to run out of money, but we also don’t want to leave too much at the end of life either where we could have done a lot more for ourselves, our family and our community while we were alive and healthy.

So, again, do you know how much volatility you can afford before your financial goals are jeopardized? If not, you probably could benefit from my planning and investment process

If you or anyone you know could benefit from this information and improve their financial situation with my process kindly have them reach out to me at or call my cell phone 312.420.9617, and I’ll see what I can do to help.

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