I wanted to offer a refresher to refocus our attention on the big picture of what we’re trying to accomplish together.
The big picture (from a financial perspective) is to maximize the probability of achieving your financial goals. Everything I do, along with the sacrifices you make when putting money away, is oriented towards that objective.
For most my clients, their primary financial goal is becoming financially independent in retirement or remaining financially independent throughout retirement.
The traditional rule-of-thumb for how a portfolio should be invested over time has been to gradually reduce risk throughout your life so that you start your career invested very aggressively but end a long, full life invested very conservatively.
I’ve previously addressed why this is such a dangerous rule-of-thumb here. Many people nearing retirement, or recently retired, should be invested quite conservatively around their retirement start date but then can afford to get MORE aggressive later in life. Continue reading “A Refresher…”
Executive Summary: The price you pay for an asset determines your return.
I came across this chart over the weekend from @OddStats. The chart shows the returns of the S&P 500 by decade.
Continue reading “U.S. Stock Market Returns by Decade”
Yesterday, I wrote about why financial planning is so important. I included an actual case study of how a robust financial plan can help shape your investment strategy to give you a better chance of achieving your financial goals and preserving your financial independence across a variety of market environments. In that commentary I introduced the concept of “Sequence of Returns Risk.”
Sequence of Returns Risk is absolutely critical to understand especially for folks within 5 years of retirement or who have retired within the last 7-10 years. Continue reading “What is “Sequence of Returns Risk” and Why Should You Care?”
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”
My expectation for losses in U.S. stocks during the next bear market is over 60%, which would take us back about twenty years and would require at least a 150% gain just to get back to even.
What impact would such a loss have on your portfolio? What impact would that have on your ability to retire or sustain your retirement lifestyle? Would any other financial goals be impacted? How about the toll on your mental health to see such a large chunk of your life savings wiped out. Continue reading “Are You Prepared for the Next Bear Market?”