Over Christmas break, a friend asked me, “Nic, what’s the ONE thing we need to do in 2024?”
I am sure he was looking for a tactical, actionable recommendation such as: “Sell large cap growth stocks and buy small cap value stocks,” or maybe “It’s time to sell stocks and buy (insert different asset class: gold, bonds, cash, cryptocurrencies, etc..).”
I get it, after all, this is what the headlines are constantly feeding us.
My response however: “Don’t get distracted. Hold tight to your financial plan.”
(I think my answer bored him)
Although the thing is that most people don’t realize is while my answer is simple in theory, it’s quite difficult to adhere to without a trusted guide by your side.
Everyone’s going to have a prediction, especially this time of year, so sticking to a plan and not making too many moves sometimes is the hardest advice to take.
You’ve heard it from me many times, nobody can consistently predict what will happen in the near term.
Even more so, in the event we somehow knew all economic data that will be released throughout the year, we still don’t know how markets would react to it.
The closest thing we have to an answer key is creating and acting upon a financial plan designed to fund your families most important long-term goals and desires.
Sometimes this means that we must sit through some short-term pain to experience the long-term rewards.
This year, the global stock market could go up 20% or could go down 20% – I don’t know and nobody else does either – believe it or not, neither outcome should impact a rigorous financial planning process.
…but what if it did (market of correction of -20%)
SITUATION #1 – RETIREMENT
If you’re retired and currently withdrawing money from your investment accounts, we are prepared for this possibility.
In fact, we recommend five years’ worth of the income you need from your investments in short-term fixed income instruments.
SITUATION #2 – YOU ARE STILL ACCUMULATING
If you’ve not retired and are still accumulating investment assets to become financially independent, a 20% global stock market correction would be manna from Heaven.
Why?
Because you are accumulating more shares by systematically investing in a falling market, which we believe, based on history as our guide, will recover over time.
CONCLUSION
Whether the market goes up or goes down, you win when you have a plan.
The world will try to convince you to act upon an emotion such as fear or greed. We refer to this as the “behavior barbarian.”
It is powerful.
It generally starts with the phrase, “I just heard in the news…”
Our job is to take you back to the plan in moments like these. How would acting upon this news affect the long-term likelihood of funding your plan?
Our commitment to you is we will do everything in our power to help you stay on track to fund the goals you have identified as most important to you and your family.
I wish you and your family peace and prosperity as we enter 2024.
Cheers,
Nic
