Are You Goal-Focused and Planning-Driven?Submitted by Financial Planning Solutions, LLC on January 10th, 2019
The last few months have woken up a lot of investors. Suddenly, the markets seem to be in free fall one day and rocketing upwards the next. After nine--almost sleepy--years it appears that market volatility is back. And now that everyone is opening up their 2018 year-end statements, the picture is not pretty. As stock prices have fallen, investment strategies—or the lack there of—are being laid bare.
All of this has happened in just under the last three months. Does that performance really matter, especially if you are a long term investor?
In preparing to send out our quarterly letters and statements to clients this week, we have given a lot of thought to what makes us different in the context of recent market events. Here are some excerpts that describe how we think about investing:
The FPS Investment Philosophy
Especially in the context of recent market volatility, we believe it is worth restating our overall investment philosophy: It is goal-focused and planning-driven, as sharply distinguished from an approach that is solely market-focused and current events-driven.
Every successful investor we have ever known was acting continuously on a plan. In our experience, failed investors tend to react to current events in the economy and the markets. In addition:
We do not attempt to time the markets, nor predict which market sector will outperform other sectors over time. However, we do look for opportunities that we feel have long term potential given current market and economic data. We are planners rather than prognosticators. Investors rather than speculators.
Once we have your investment plan in place and have funded it with appropriate investments, we hardly ever recommend changing it so long as your long-term goals haven't changed. In general, we have often found that investors who change their portfolios in response to the market fears or fads of the moment, tend to experience worse performance over the long-term.
Our essential principals of portfolio management are fourfold:
1) Your short-term performance compared to a benchmark such as the unmanaged S&P 500® index is largely irrelevant to your long-term financial success
2) Your focus should be on whether you are on track to accomplish your long term financial goals
3) Risk should be measured as the probability that you won't achieve your stated goals
4) Investing should have the primary objective of minimizing that risk.
We use this approach to avoid reacting to short-term events, which can be costly. While our approach does not guarantee a specific rate of return, it is guided by your individual financial goals. To us, that’s the most important element of financial and investment planning.
If you have questions about the current market environment, give us a call. We won’t be recommending big changes to your portfolio, but we’ll be glad to discuss the ways that you can achieve your long term goals.
Lyman H. Jackson
Financial Planning Solutions, LLC (FPS) is a Registered Investment Advisor. FPS provides this blog for informational and educational purposes only. Nothing in this blog should be considered investment, tax, or legal advice. FPS only renders personalized advice to each client after entering into an advisory relationship. Information herein includes opinions and forward-looking statements that may not come to pass. Information is derived from sources believed to be reliable. Information is at a point in time and subject to change without notice. Such information may not be independently verified by FPS. Please see important disclosures link at the bottom of this page.