The primacy of a plan

Staying financially fit during turbulent times

September 7, 2017

In a recent blog post entitled Politics and investing are incompatible bedfellows, I explained my deep conviction that having a financial and investment plan was fundamental to long term-wealth building success – particularly in times of volatility.

I suggested – using the extreme shocks of the attack on Pearl Harbour, the assassination of John F. Kennedy, September 11, 2001, and Standard & Poor’s downgrading of American debt rating in 2011 as examples – that while markets might wobble, eventually they return to whatever it was they were doing before the destabilizing event.

Quite frankly, today’s current environment is nothing near as nerve-wracking as it was when those events took place, so it’s important to resist the temptation to make panicky portfolio changes when they are not justified. My advice?

Stop worrying about things you cannot control

Instead of worrying about things you cannot control, stick to the fundamentals of your plan – if you don’t have one, talk to me and I’ll work with you to build it – and remember that your financial future depends on how much you save and invest, how you control your spending, and how you structure your portfolio.

It is a validated article of faith, as articulated by myself and the professionals at Scotia Wealth Management – let’s not forget we are the investment arm of Scotiabank, one of North America’s premier financial institutions and Canada’s most international bank – that financial planning is the key to staying fit during turbulent times.

Stick to your plan & stay focused

Try not to make impulsive decisions based on emotions. Stick to your financial plan and think about the long-term picture. When you hear about a downward trend of the market your immediate reaction might be to sell long-term equities to avoid further loss. While this is a tempting strategy; do not give in to your temptations. By remaining invested, you give your portfolio the opportunity to recover any paper losses in the long run.

Maintain a diversified portfolio

Look at your existing investments and determine whether your funds have been allocated appropriately and are in line with your varying goals. A diversified portfolio consisting of stocks, bonds and cash investments tends to minimize risks. Revisit your portfolio periodically with your advisor so that you can take advantage of the declining market and rebalance your portfolio.

Continue regular contributions

By making regular contributions to your investment plans, you will mitigate short-term investment risks in a volatile marketplace. When you invest on a regular basis, not only are you contributing consistently but you are also benefiting by purchasing more with the same contribution amount. In a declining market you will be able to buy more investment units at a lower price.

Work with a trusted Financial Advisor

Organizing your finances is not an easy task and may seem fairly daunting, especially during turbulent economic times. You might feel overwhelmed to make investment decisions or you might want to go over your investment strategy with a professional. Your advisor and their team of specialists have the necessary experience and expertise to help you focus your priorities, allocate your funds properly and select the specific financial products that will meet your financial objectives.

At the conclusion of my earlier blog post about why investing and politics don’t mix I wrote: ‘Discipline and patience are required for any long-term plan to work. Stick to the fundamentals. And, as the motivational poster produced by the British government in 1939 in preparation for World War II proclaimed: Keep calm and carry on. Quite so.

Geoff Funke, Senior Wealth Advisor, Scotia Wealth Management, 604.535.4721.