The Importance of Financial Planning

This lull in market volatility provides a good opportunity to step back and look at the bigger picture…. the importance of a financial plan.

There are so many important financial decisions and questions that can be shaped and answered by a robust plan. It does far more than simply helping determine if you’ll be able to retire when you want and how you want.

But, today, let me focus on just one interesting example of how a robust plan can help you make better investment decisions and increase your probability of remaining financially independent in a variety of market environments. Continue reading “The Importance of Financial Planning”

Financial vs. Emotional Capacity for Risk: The Importance of Weighing Both When Building An Investment Portfolio

Your investment strategy should be determined by the lesser of (1) your financial capacity for risk and (2) your emotional capacity for risk. Otherwise, you are likely jeopardizing your financial goals.

What’s the difference you ask?

Financial capacity is the ability to achieve your financial goals even after a severe stock market decline.

Emotional capacity is the ability to stomach volatility and losses in a severe stock market decline.

A couple examples will help illustrate these concepts.

Continue reading “Financial vs. Emotional Capacity for Risk: The Importance of Weighing Both When Building An Investment Portfolio”