Make a new plan, Stan

The markets and media in the past week have driven fear and anxiety into the minds of almost everyone I know. Uncertainty against danger is an awful feeling.

Risk is what we don't see coming. What's a person to do when a virus stands to limit our day to day lives, impact our productivity and unravel the most recent highs in the stock market?


If you have a financial plan in place, you've anticipated this retraction. For the past year we've been in a state of awe as the economy we thought was on the brink of recession has continued to climb to stratospheric levels breaking historic barriers.

Economies are cyclical and while we couldn't have predicted a global epidemic, we always know that it a natural disaster, an election, or a war will cause our swollen, bloated stock market to begin to recede.

Stocks are the best way to build wealth overtime, but there is a very real price to pay - discomfort, anxiety, fear. Market declines are the price of admission, they are the risk we must take in order to have gains.

When I work with clients, we build this expectation into our financial plan. We plan when things are calm and the unknown is on the distant horizon. And then when the unknown, inevitable comes knocking on our door....we're ready. We hold our stance and stare it down.

If you have idle cash waiting to invest, here's your chance - everything's on sale!

If you're saving a bit of each paycheck to invest, great! This month you're buying a lower cost basis than last month.

If you're retired and living on a fixed income from investment withdrawals, stay calm. You have a diversified portfolio that was built to hedge this type of correction. Rebalancing at a lower cost basis will benefit you in the next economic cycle.

If you're still nervous, here's a strategy:

Immediate cash flow should be suppressed with prudent attention to spending and prioritizing needs over wants. If you have a crisis (i.e. job loss, unexpected expense) and you need more cash, pull from your high-yield emergency fund. Investment allocations to inflation-protected securities and fixed income are more liquid if equity allocations are trading at a loss.

All of these are protective measures and clients can be at ease knowing that yes, the news is scary and the markets are cratering but we planned for this. There's no need to make sudden, irrational changes to your portfolio. You're prepared and you can weather this cycle.

If what I've described above isn't you...if you weren't expecting this volatility. It's not too late - let's create a financial plan that will bring you peace of mind.


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