“Your Goals > Stock Market Movements”

Given all of the uncertainty surrounding this election week, I thought it was an important reminder that our personal (and long-term) financial goals are more important than short term stock movements.  The below is a post that we originally published in July of 2019, but the main thoughts surrounding how we can view market fluctuations are just as important today.  Whether it was the COVID dip we saw in February and March or the recent uncertainty surrounding the election, the news headlines can sometimes cause us to second guess our approach.

Let’s face it, the stock market can be a very scary place.  Even if the market is moving up, there seems to be constant headlines about when our next recession will be or what events will lead to a “major correction”.  On top of this, most people find the whole process of opening accounts and actually investing in the stock market to be confusing and overwhelming.  Should we be paying attention to all of this and tweaking or adjusting our investments to react to all of this news?  In our opinion, each client’s individual goals are far more important than trying to predict stock movements.  Long term financial goals often prove to be a valuable reminder and barometer check when the inevitable short term fluctuations occur.

Without Goals we Tend to React

In our experience, people who don’t have long term financial goals tend to be more easily swayed by the volatility within financial markets. People read news headlines, and a natural tendency is to want to do something (anything, really) when we see the market moving quickly in one particular direction.  The same can be said for many things in life.  When a sports team enters a competition without a plan in place, they start reacting to what the other team is doing and get sidetracked from their own goals.  However, those who have a solid financial plan, are more encouraged to stay the course and see the plan through to “completion.”

Goals do change

Having goals is very important but recognizing that changing circumstances lead to changing goals is also just as important.  Retirement is one of the more common life experiences that requires people to make a mindset shift from growing their nest egg to preserving their nest egg.  Having children, buying a home, or moving to different cities and countries are all circumstances that can cause someone’s financial goals to change.  The important takeaway here is that financial goals should not be set once and then forgotten.  A real financial plan allows for goals to change and adapt just like life does.  The end game here is not to have goals that never change; rather it is to make financial decisions based on your individual goals rather than recent stock market movements. 

A Financial Plan should be Re-Visited

We’ve all seen, or know someone who has seen, the traditional “financial plan” which is 2 inches thick and so hard to interpret that you would need a finance PHD to make sense of it.  Most of the time these plans are interesting for the initial hours or days that we digest them and then they sit on the shelf to gather dust over the years.  We believe that a comprehensive financial plan should be a living, breathing document that continues to be visited and updated.  When this interactive and “live” approach is taken, people place a higher value on the goals they have set for themselves and tend to stay the course when the stock markets fluctuate.

If you, or someone you know, are tired of being scared by stock market fluctuations and want to develop long term financial goals to help weather the storm, then reach out to us for a discussion!