The portfolio which you own is probably designed in the best way possible to achieve your financial goals. However, the market is quite volatile and can have a huge impact on your goals.
The volatility of the Market:
The market is extremely volatile, getting affected by the latest news as well as the smallest event occurring in a different part of the world. Hence, in order to achieve your goals, you should work towards having a financial plan which does not get affected by the market’s volatility.
For instance, if someone aged 55 in 2010 planned on retiring by 2020 must have had a great financial plan in place. You could probably aim at earning a return of about 10% per year for the next decade. However, due to the pandemic in 2020, the financial plan would not have worked as expected, in fact, it was highly unlikely to end up with the amount of money you had started with.
Building money over time may appear hopeless, but a well-designed financial strategy can assist you in navigating the market's ever-changing ebbs and flows.
A Dynamic Financial Plan is the requirement of the hour:
A financial plan can help you figure out how to achieve your objectives. Any smart financial strategy is adaptable. People frequently consider their financial plans to be set in stone. You don't want to stray too far from your objectives, yet objectives evolve. As your objectives change, so must your strategy.
Changes in your life might have just as much of an impact on your financial goals as market fluctuations. You could start a new career, change your tax bracket, or buy a house. You might have a child or get divorced. You might get a hot stock tip or a stock warning, on which you want to act. You have the option of filing for Social Security at the minimum age or waiting until you reach the maximum age.
The truth is that no one can anticipate what asset mix will return 10% per year for the next decade. However, you may devise a strategy that takes into account the various possibilities that life may throw at you.
Your plan of action?
The first and foremost thing you should do is to be aware of the market trends at the current time. It would be a good practice to use the resources you have. Additionally, it is advisable to stay in touch with your financial advisor. The risk of your financial plan not working as expected can be mitigated by developing a good financial plan with good financial resources.
Your emotions drive a lot of your decisions. You should make it a point to not get distracted by emotions and deviate from your financial goals. It is always better to keep your financial plan in your head and make decisions accordingly.
A good financial strategy with the correct financial planner would help you think rationally and make good decisions in case of unplanned situations and emergencies.
The security of a Financial Plan:
Although there is no way to forecast the future, one thing is certain: markets will always be unpredictable. A financial planner's role is to work with you to create a well-thought-out strategy that accounts for any obstacles that can derail your plans. This gives you the confidence to face the inevitable times which you probably wouldn’t have planned for.
So, if you have a strategy in place, adhere to it and make sure it's updated when your objectives change. You're missing out on the sense of security that a good financial plan can provide if you don't have one yet and are just focusing on investing advice.