The DJIA, S&P500, Russell 2000, Nasdaq Composite, etc. There are hundreds of indices that report on a variety of investments. Which is the most appropriate for your family? How do you know if your investments are performing in a manner that will help you reach your goals? Keep reading, we have the answer.
While assisting our clients in reaching their retirement goals, we use our proprietary LifePlan SolutionTM process. An outcome of this process is a special index we use to provide our clients a better understanding, not to mention an easier process for monitoring their assets, by computing a unique index – The Family Index.
Your family is unique. Your tolerance for risk, cash flow needs and goals for the future may or may not require investing your lifetime savings in the same manner as the aforementioned indices. We apply our process to your family’s cash flow needs over its projected lifetime and determine the needed return to accomplish your goals. As simplistic as it sounds, the process is quite easy for our clients to understand and, more importantly, confidence is maintained because they realize it is particularly tailored to their family’s needs.
Discipline to adhere to the plan is necessary for your family to truly benefit. When the markets are reporting 10% returns for the year and your portfolio achieved 7%, it is vital to remind ourselves that you didn’t participate in the negative year so deeply nor the highs of the current year. Additionally, your family is most likely not 100% invested in the stock market as represented by the DJIA or S&P500.
Recent market performance has been setting record highs. All markets move in cycles. If you wish to reduce the volatility in your family’s investments, it is critical that you allocate the assets in a manner that meets your risk tolerance and other qualitative needs. Many of our clients appreciate the process mentioned above but seek guidance on a continuous basis to make certain any plan modifications required by changes in their family’s needs or desires are properly and timely addressed.
One of the most critical mistakes we have witnessed clients performing is market timing. It has been scientifically proven that the average investor is not capable of investing in a manner to predict the rise and fall of markets. Don’t fall into the trap of listening to “water cooler” experts that “know how to beat the markets”. Too often the “expert” has been proven wrong but your family is the one that pays the price for the lesson learned.
The Family Index is one tool we utilize in an arsenal of tools to help your family realize its dreams. Don’t attempt short cuts and expose your family’s future to gambling on market timing. Seek out a Certified Financial PlannerTM practitioner to help you prepare, implement and monitor a plan that is sound and provides your family with confidence about the future.
