Here are some of the things we learned (or should have learned!) over the past year:
Lesson 1: Reassess your risk tolerance.
Are you less aggressive than you originally thought? If fear led you to sell during the decline, then your risk tolerance is probably more conservative than you originally thought and you should make the appropriate changes in your portfolio.
Lesson 2: Reasses your expectations about future returns.
Still dreaming of the double-digit returns of the ‘80s and ‘90s? Make sure you base your projections on realistic expectations of future returns. It’s better to be surprised to the upside rather than realizing you won’t be able to retire because you didn’t get the returns you expected.
Lesson 3: It's OK to turn off the financial news.
Newsflash: The financial press cares about making money, not whether or not you achieve your financial goals! So during the next downturn (yes, there will be another one!), turn off the “doom and gloom” and stick to your financial plan. (Don’t have a financial plan? See “Lesson 5”.)
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Lesson 4: Cash is king.
Cash is important for several reasons. First, everyone should have a cash reserve for emergencies. Second, cash holdings are stable, so having cash in your portfolio can calm your nerves when the market is falling. Third, downturns like the one we’ve experienced can create excellent buying opportunities, and the only way to take advantage of them is to have cash on hand. -->
Lesson 5: Don't leave your financial future up to chance.
Financial success doesn’t occur by chance, so take an active role in planning your finances. Make sure your financial planner is providing sound financial advice rather than simply selling financial products. The best way to do this is to work with a “fee-only” advisor that never accepts commissions from his or her recommendations. And, if you’re a “do-it-yourself” investor, consider getting a second opinion from a fee-only advisor that works on an hourly basis.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com.
