I’m currently meeting with clients and doing year-end portfolio reviews and plan updates. Since the election is over and The Fiscal Cliff is looming, it seems everyone wants to know what they should do before the end of the year?
First of all, I don’t think investors should shoot first and ask questions later. We may feel like we have a ton of additional information to process in the last week or so, but we really don’t. As I answered the question with each client during each meeting, it occurred to me that it really shouldn’t affect your long-term plan. Before you do anything you might regret, you should walk through a few of these steps.
1. Do you have a financial plan? I’m going to assume you do. A written financial plan that has forecasted your long and short-term financial goals. A financial plan that has reviewed your assets, liabilities, asset allocation, retirement and estate plan. The blueprint that will get you where you want to be financially.
2. Does this new information change that plan? Unless you have changed your mind about what it is you want to accomplish, why would you abandoned well-laid plans? Financial planning builds risk and uncertainty into the plan results. When I review with clients, I show them how market corrections have affected their long-term goals and whether they are still on track to reach those goals. It gives you great peace of mind to know that you still can reach retirement even after a major market correction like the one we had in 2008.
3. Should you make a change? Once you review the plan after this new info is available, the question remains…should a change be made? As I’ve said before, you make changes when goals change or circumstances in your life change. You should not make drastic changes in your portfolio or plans based on markets or politics.
So…no goal change + sound financial plan = stay the course.
I’m not saying that for some of you some changes might need to be made. All I’m saying is don’t trash a good financial plan because of fear. Fear is one of my two great motivators. It can cause you to make poor decisions at exactly the wrong time. If you would like to start a financial plan, or just review yours, write me at firstname.lastname@example.org, or call me at (859) 225-2596.