Can you really “keep calm and carry on”?

“Following the plan” is investment advice, financial strategy and part of the actual plan.

That doesn’t make it easy or comfortable.

With volatility up and a market down more than 5% in January, and with higher inflation, rising interest rates, a global supply chain crisis, international unrest, global politics and more whirlwinds around us, the idea of ​​”staying the course” seems more like something you reluctantly agree to do rather than eagerly pursue.

Darrell in Lynnwood, received this advice last week from his financial adviser. He’s in his 50s, an office administrator who’s set to retire a decade from now after meeting his savings goals, provided the market doesn’t trample on his dreams.

Nervous about how much his hopes and dreams hinge on avoiding a market annihilation that “will force me to work until I’m 70,” Darrell wanted more concrete reasons to stay the course now.

He is far from alone.

“Keep calm and carry on” might be the right thing to say for the experts, but it’s just as hollow as the awful “Now is not the time to panic” mantra you get from financial talking heads whenever the market looks set for a crash.

The latter is bad because it implies there might be a good time to panic.

The idea of ​​standing firm is troubling because the people who need this guidance — including Darrell — have already lost their sense of calm.

“How can you convince me to stick to the plan,” Darrell asked.

Here are some ideas that I hope can help you strengthen your spine, no matter what headlines and volatility we go through next:

Look at the odds. Studies have been done on daily stock market returns dating back about 100 years, before the Great Depression, and they show that the odds of making money in the stock market outweigh the odds of you not. not.

Be careful, every day there is a good chance that you will lose money. It’s almost a toss-up; historically, losses occur on approximately 45% of days. The chances of loss do not decrease much if you were to invest for a week.

But if you were to invest for a decade, historically speaking, there’s about a seven out of eight chance you’d make money. And it’s important to note that these historical results are based on price returns only; add dividends to the mix and total returns increase, greatly reducing the risk of long-term loss.

That’s why you don’t let bad days become a reason to abandon a long-term plan.

Review and update the plan. A good financial plan is more about establishing emotional discipline — the ability to set a course and follow it — than about choosing investments.

It should be built to last a lifetime and annual reviews should measure progress and yes, in an ideal world it can be set and tracked forever.

But life is what happens when you make other plans, and there’s no doubt what happened/is happening in your life could affect how comfortable you are with the program.

David Snowball, founder of MutualFundObserver.com once told me that there are three kinds of reasons investors adjust their portfolios: “strategic, structural, and dumb.”

The structure has to do with the specific investment you are buying and if anything has changed there; dumb reasons revolve around emotion and wrong thinking.

The strategic reasons for making a change usually revolve around life circumstances. If you’ve lost a job or things are getting uncertain at work, if your child’s first tuition payment is imminent, if you’re retiring or if you win the lottery or inherit a bunch of money If you change financial goals because there are grandchildren, life events should factor into your plan.

Until you examine the life changes related to your finances and make the appropriate structural adjustments so that the plan you are following reflects your hopes and dreams now, you may not have the complete confidence to stay calm. and continue.

Check that you are following the plan. If there’s anything other than the daily market action that’s making you nervous, maybe something’s wrong.

Rebalance your investments so that they are in line with the program. If you created a 60-40 stock-bond portfolio 15 years ago and you let it go, your asset allocation is probably closer to 80% stocks now, simply because market returns have far outperformed bond results.

Selling your winners to invest in your laggards is tough, but if you came into the end of January wishing you had taken some of your winnings off the table, a rebalance might have saved you some angst. It may be less necessary now that the market is down a bit, but make the effort to get back on the plan precisely because you want to follow the path you’ve charted rather than where the market is taking you.

Remember that the days are long but the years are short. It’s hard to watch a wallet that experiences repetitive daily knocks.

These daily movements on your lifetime savings may seem large in dollar terms; a red note indicating the loss of a few thousand dollars seems significant, even if it is just an ordinary day in the market.

The media always has another headline, the market has another story, and investors have short memories of both. Unless this is the first time you’ve been nervous about your investments – and if you’re being honest you know that’s not the case – you know that current market events will quickly pass into the quagmire of the future. Other times when market news made you nervous but didn’t derail you.

It doesn’t matter what happens in the day-to-day market unless you make it that way. You would do this by making changes at the wrong time.

In short, don’t just do something, just sit there.

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