How Market Volatility And My Financial Plan Coexist

How Market Volatility And My Financial Plan Coexist

Since economic uncertainty and stock market shifts are unavoidable, investors are best equipped with a comprehensive financial plan that accounts for volatility. The roller coaster tendency of the stock market is widely familiar, especially to investors who have gained or lost during dramatic spikes. Yet, there exists an opportunity within every obstacle, right? 

When harnessed correctly, a volatile market can generate returns for diligent and, most often, experienced investors. Yes, opportunities are there even when markets crash, fluctuate, or surge. Keep in mind that those approaching or in retirement should move into less volatile investments in general.

Need to discuss market volatility with a Libertyville, IL financial advisor? We can assist you in any phase of your financial journey.

For individuals just getting started in the arena of investing, for those doing it themselves needing a second opinion, or for affluent individuals seeking a new financial ally they can trust, read on.


What is market volatility and why should I care about it?

Since the market doesn’t care about investors’ financial goals or risk tolerance, they must care about volatility. Better yet, they can hire someone highly experienced in comprehensive financial planning, so they can learn from a professional who has made it their life’s work. 

The biggest reason that investors should care about market volatility is that by understanding it, they can have an idea of how the market will react. For example, since higher volatility relates to a higher probability of a market decline and lower volatility corresponds to a higher likelihood of a market rising, investors can apply this data on long-term stock market volatility to align their portfolios with the correlated expected returns.

By keeping an eye on national/regional tax and interest rate policies, investors can significantly contribute to the directional change of the market and greatly influence volatility. Long-term stock market trends and volatility can also be impacted by industry and sector factors, as well as inflation.

A team of fee-based financial planners that care, can help craft a solid portfolio backed by years of experience, study, and consulting with industry experts. An investment strategy needs to be deeply researched, ensuring that your portfolio is positioned to withstand all market conditions based on your risk tolerance and time horizon.

We let your true objectives and the financial plan dictate how your assets should be invested.


How will market volatility impact my comprehensive financial plan?

Let’s imagine that in 2001 you were 54 and aimed to retire in ten years. At the time, you calculated that your portfolio required an average annual return of 10% to reach that retirement goal by 2011. However, your well-designed portfolio was obsolete due to the 2008 market crash. If you were lucky, you could have reached 2011 with about the same funds you began with. market volatility and financial planning

What does this show you? 

A comprehensive financial plan can brave the market if it accounts for its erratic ups and downs. Trying to build wealth alone is where many people tend to drop the ball. Working with a planning partner like Prism will ensure diversification amongst many different sectors, which is crucial for potential long-term portfolio success. 


Are there any steps I can take to help reduce the effects of market volatility on my overall financial security?

In order to minimize the effects of market volatility on the safety of your assets, investments, and savings, there are five big steps you can take.

  1. Get help with diversification.
  2. Have a bit of cash on hand. 
  3. Create and maintain a precise portfolio mix. 
  4. Apply financial discipline around withdrawals. 
  5. Do not let emotions rule your financial decisions.


Should I adjust my comprehensive financial plan in light of current market conditions?

Market disruptions create the perfect window for a refreshing financial discussion, so yes, adjustments are in order. During intense climbs in a bull market, investors’ portfolios can teeter off-balance as outperforming holdings make up an increasingly larger portion of their assets, which can create substantial tax liabilities. 

Here are some useful ways in which you can consider adjusting your financial plan to get a grip on portfolio drift

Tax efficiency:

  • Reevaluate your accounts.
  • Review your funds for tax efficiency.
  • Evaluate your merits of a Roth conversion.
  • Ask your advisor about rebalancing between accounts to improve asset location.

Asset allocation:financial planning during market volatility

  • Think about rebalancing.
  • Reassess your risk tolerance.
  • Review passive vs. active holdings.
  • Tend to concentrated equity positions.
  • Review low-cost vs. high-cost holdings.

Retirement strategies:

  • Go over spending rates.
  • Review your liquidity buffer.
  • Discuss retirement spending strategies with your advisor.
  • Decide upon a taxable and tax-advantaged accounts withdrawal order.

For example, if you withdraw retirement funds before you reach 59½, you will accrue a 10% tax penalty. Aspects like this need to be explored with a professional fee-based financial planner acting as a fiduciary.


In Summary

When bull markets manifest, creating volatility, and as retirement approaches, it can reduce the effectiveness of diligent plans. The honest truth is that there’s no way of knowing what asset mix will return 10% annually for the next ten years. However, investors can be backed by a comprehensive financial plan that accounts for various scenarios.

Extra tension can be avoided if investors are shifting their portfolios to more conservative investments that can weather the markets. Especially investors retiring at the brink of a recession, they must be assiduous with their withdrawal plan.

Whatever you do, don’t let fear or anxiety influence your judgment. Your dedicated financial advisor in Libertyville, IL will let you know how often you should review your comprehensive financial plan, to ensure that it continues to meet your needs.  

Explore investment management with a Libertyville financial advisor today. We provide unbiased counsel in your best interest at all times.

Are you ready to adjust your comprehensive financial plan? Help is here, at Prism Planning Partners, LLC. Reach out to set up an appointment with our team!

Prism Planning Partners, LLC dba Prism Planning Partners is a Registered Investment Adviser. This article was produced by Paladin Digital Marketing, an entity unrelated to Prism Planning Partners and may not necessarily reflect the expertise of this financial advisor. This publication is not intended to provide investment advice and is intended for your information only. Opinions and forward-looking statements expressed are subject to change without notice. Information based upon third-party sources and data are believed to be accurate and reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. All domestic and international rights are reserved. No part of this publication including text, graphics, et al, may be reproduced or copied in any format, electronic, print, et al, without written consent from Prism Planning Partners. Neither Prism Planning Partners, nor its investment advisor representatives provide legal or tax advice. Please be advised to consult your investment advisor, attorney or tax professional before making any investment decisions.