The impact of our behavior on financial decisions is something that is getting more and more needed attention in the financial planning industry.  As volatility has picked up in the investment markets in recent days we thought it was a good time to re-address the philosophy we implement.
As we stated in a previous post,borrowing a line from a colleague: the “markets” tend to take the stairs up, and the elevator down.  Knowing this, and being prepared for how it will impact your investments, will help us all make better decisions when the elevator doors open.
During the past 5 years we have seen the U.S. stock markets follow the stairs up.  During this time we have continuously rebalanced your portfolios to ensure you are not taking on too much risk.  I am sure you have heard Tim or I say that the time will come when the “markets” will take that elevator ride down.  The question is not “if” an elevator ride down will occur, but, “when” an elevator ride down will occur.  Next week?  Next year?  In five years?
Sorry, but, we don’t know the answer to this question.  We do know that when the time comes we should take the same approach we have during the stairway up, to rebalance your portfolio to the appropriate level of risk.  It is during these times on the stairs that we should consistently be revisiting your goals and understanding the appropriate level of risk for your investments, whether they are traditional stocks & bonds, real estate, or private investment opportunities.  This will allow us to understand what we expect to happen to your asset values during the next elevator ride down, before it occurs.  Being prepared for this should help us make better educated, more rational, decisions when the time comes since the ride down may occur faster than the climb up.
To help us assess risk, we have asked many of you to complete a brief questionnaire from RiskAlyze that focuses on the dollar amount gains and losses you would be comfortable with in a 6 month period of time.  If you haven’t completed this yet, pleaseexpect to hear from us in the coming months.  This is an exercise we plan to revisit with you on a regular basis.


As always, we are here to answer any questions you might have.