Company values contracting, expanding, and contracting again can test the patience of the best investors.  This up/down movement in prices is unsettling, especially if you allow account values to define your progress as an investor.  If you haven’t created or updated your financial plan lately, it’s difficult to know what it will take to retire successfully (and stay successfully retired).  Attitudes often mirror the market when planning and strategy are absent.  This IS stressful.  Here are three thoughts on keeping your dollars invested as we navigate this turbulence.

Thought number one, perspective on how far the market has truly traveled.  When I was born in February of 1973, the S&P 500 index was 118.40.  Then eighteen years later, graduating high school in June of 1991 the index was 378.29.  Four and half years later in December 1995, I graduated from Virginia Tech and the index stood at 614.57.  Today, the S&P 500 index stands at 3,932 +/-.

Two take aways here.  One, I can’t believe a graduated college almost 27 years ago!  Two, more importantly, that 27-year timeline is eerily close to the length of time that a 65-year-old retired couple needs to stretch their investments for living expenses.  It’s not volatility in price that should grab our attention as much as it is about keeping monies relevant.  Life will be more expensive tomorrow.  Investors need to avoid the temptation of trading their accounts, moving to cash, or investing in target date funds.  None of these actions make sense when you have a financial plan stretching decades into the future.

Thought number two, do you have enough cash reserves?  Countless studies on behavioral finance and my twenty-seven years as a financial professional confirm cash matters.  Holding the correct amount of cash in times like these may be comforting to investors.  Cash should never be viewed as an investment or invested in a manner where it’s restricted and not available.  Attempting to squeeze yield from cash misses the point.  Treat your cash reserves as buffer or room for error by integrating these accounts into your plan.  It’s the necessary Vitamin C we all need when market volatility persists.

Some investors wished they held more cash as the pandemic took hold in March of 2020.  Then after a while of spending solely on groceries hanging out in your pajama pants at home, cash reserve levels increased across all spectrums of wealth.  It’s these cash reserves that allow you to stay invested and ignore day to day market results.  Cash reserves are boring but must be established and maintained as part of your investment strategy.

Thought number three, put your device down and stop checking account values.  What happens in today’s trading session will have a nominal impact long term.  Defining what “enough” means as an investor allows you to relax and not sweat the near term.  The hamster wheel of “more” is tiresome and ultimately will leave you frustrated and disappointed.  Real happiness arrives when you appreciate what you have, have a plan that directs your inputs, and turn your attention to other activities and people who are important to you.

Want to learn more?  We just updated our financial planning page which details our repeatable process in support of sustainable planning.

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