By Rick Fisher | Download the PDF | Originally published in The Union
In 2017, the equity markets were relatively calm in terms of volatility. In 2018 and 2019, the equity markets have shown much more volatility, with December of last year being an extreme example. This return to volatility can make investors nervous and our clients are no different.
One such case is of the hypothetical couple John and Grace, who are in their mid-50s and starting to think seriously about retirement. They are both are currently working and want to stop working as soon as they can collect Medicare. They have always been good savers and were pursuing their savings goal before the market volatility at the beginning of 2018 started showing up. They called, concerned that the recent volatility would hurt their retirement plans.
After reviewing their investment portfolios, pension plans, and social security benefits, we met with them and recommended that they stay the course that we had set. We explained that the current plan of maximizing their contributions to their respective retirement plans for the next ten years should give them a large enough nest egg to sufficiently augment their social security and pensions in retirement.
We further explained that we assumed a reasonable return rate of 5% per year and designed a portfolio that should produce but not guarantee those returns. Given the time we had, this would be a goal to pursue.
We went on to explain that current events will always affect the equity markets in the short term, and historically, returns even out over longer time frames. We asked them if they needed any money for projects or vacations within the next year that current cash flow and savings could not cover. They said no, and we reiterated our recommendation to keep the current portfolio strategy and keep the same level of annual investing in retirement plans.
In the end, they understood that the current volatility had less to do with the value of the investments they currently held as it did with the emotions of investors reacting to the news of the day. With this in mind, they felt more comfortable with the current plan and less nervous about the recent market volatility.
It is not always easy to keep calm with markets that are not, and we all need to be reminded to look at the big picture. Just remember this saying: it is time in the market, not timing the market that leads to financial independence. Should you have concerns about your portfolio and your retirement plans, consult a professional and call us at 530-273-4425.
The opinions voiced in the material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments or strategies may be appropriate for you, consult your financial advisor prior to investing.
Frederick Fisher is a Registered Representative with, and Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Ostrofe Financial Consultants, Inc., a Registered Investment Advisor and separate entity from LPL Financial.
For questions or suggestions, contact Frederick at (530) 273-4425, or firstname.lastname@example.org, or visit ostrofefinancial.com. Branch address: 420 Sierra College Drive, Suite 200, Grass Valley.