As a Generation X financial advisor, I was raised on Luke Skywalker, Princess Leia, and Han Solo taking on the Empire with the support of some droids and those adorable little Ewoks. I am absolutely thrilled with the reboot of the franchise for today. I’m one of those who thought Solo was just wonderful.
I’ll never forget the feeling of foreboding I had as a 9 year old hearing Obi-Wan Kenobi’s voice convince Luke to turn off his targeting computer in favor of the force while in the trenches of the first Death Star. As the Death Star count down continues, Luke pulls the trigger just in time to send his torpedoes into the exhaust ports – destroying the Death Star and saving the rebel base.
When markets get a little bumpy, the media begins to express and the public begins to feel a very similar foreboding. We aren’t sure whether we should go with the new hi-tech investment gadgetry or if we should trust our plan.
2018 started in much the same way that 2017 ended – with global equity markets up nearly 5% by the end of January – it came as a big surprise that by February 8th markets had lost all that and almost 5% more. This totally normal volatility (which should be regularly expected) was a larger drawdown than anyone saw in all of 2017 and it came as a surprise.
Whenever we are surprised, we ask… “What do we do now?”
Markets have bounced around ever since as they have dealt with myriad headlines from the Fed’s raising rates to all the talk of inflation building below the surface, to the U.S. starting trade-wars with all our trading partners and concerns about a global economic slowdown.
In reality, markets are always bouncing around and the question, “What do we do now?” should always have the same answer… for anyone with an adult memory.
Investing is a bit like flying an X-Wing through the death star trench… you just can’t know where the next fire will come from or whose ship might crash into you from above. The best thing you can do is ‘stay on target’.
Or, in terms of personal finance… “Stay on plan.”
The only question is… What is YOUR plan?
Have you thought about what is important to you and how you want your life to unfold?
Have you and your partner discussed your priorities and the trade-offs that you are willing to make?
Do you know which of your resources are spendable and which need to be saved? Do you have a long-term process to invest your savings?
Do you know if your portfolio, given the volatility you have signed up for and the amount you are saving, has a high enough probability of taking you all the way?
If you don’t have a plan, then you can’t know what you are aiming for or how far off the mark you might be when markets are volatile. You can’t answer the question “what do we do now?” This is why you resort to guessing what markets and economies might do next (an impossible task).
Not having a plan increases your anxiety and it makes it exceedingly difficult to… “Stay on target.”