Financial Planning is truly a journey.
Financial Planning: A Philosophy
We began this Financial Planning series in April by talking about Philosophy by giving you an investor’s point of view. To be an investor, you must have the philosophy of a long-term horizon. And, you need a plan.
Financial Planning: Mapping the Experience
Our second article, Mapping the Experience focused on the purpose of having a plan. We looked at planning in the context of embracing the market, diversifying broadly, focusing on what you can control and tuning out the noise (which lead into the third article).
Financial Planning: Tuning Out the Noise
Tuning Out the Noise can be difficult, especially with all the technology in our lives today. It is important to look with a mindful eye. What is relevant and what is just a headline to create ratings? Short-term noise can steer you away from your plan. It’s easy to lose sight of your overall plan by being emotionally involved in day-to-day headlines. This is where a good financial advisor can help. They can look at a situation without emotion. Generally speaking, time is on your side. You have a much better chance of meeting your goals by looking a long term well-balanced portfolio and avoiding the everyday noise.
Financial Planning: Enjoying the Ride
Reflecting back on the Family Road Trip that we described in Tuning Out the Noise, you certainly wouldn’t want to start out in a car with no suspension. What a rough ride! Every pothole or change in road conditions could cause you to lose control not to mention the discomfort. While a road trip may have a few bumps along the way, it’s part of the adventure, not the trip.
The same is true with your investments. If you create a plan that suits your risk tolerance, focuses on long-term growth and is well-balanced, then you can enjoy the ride. You have plan with good suspension that can withstand a few bumps.
“While diversification can never completely eliminate the impact of bumps along your particular investment road, it does help reduce the potential outsized impact that any individual investment can have on your journey. With sufficient diversification, the jarring effects of performance extremes level out. That, in turn, helps you stay in your chosen lane and on the road to your investment destination.” (Source: Investment Shock Absorbers, Jim Parker, Dimensional Fund Advisors, February 2017)
Happy Motoring, Happy Investing and Happy Summer!