Focus on the long term

I like to tell people that financial planning is like creating a road map. You’re wanting to get from point A to point B, with B being retirement — the rightfully earned payoff for a career of hard work and years of saving and investing. But how are we going to get you there?

Of course, it is never as easy as simply going from A to B, and this year has certainly been a stark reminder of the most important part of the planning process: The road is not always smooth.

You are going to run into potholes, like a recession. Younger investors will face several obstacles throughout their lifetime, and those nearing retirement might run into an unwanted situation close to the finish line. Sometimes you can’t avoid it.

So, how can you minimize the risk and impact? Having a plan in place — and sticking to it — will get you to your destination. Focusing on the long term, which understandably can be challenging during uncertain times, will always be the wise move.

In market environments like this year, you see people become fearful and react to that fear. In the aftermath of 2008, I saw people decide to cash out just when the market was on the verge of ending its dive, thinking it would continue to go down even further. Because they pulled out of the markets, they missed the rebound.

You cannot time the market. No one can. And it’s important not to panic. I have to remind clients that this too shall pass, and the market will eventually recover as it historically always has.

Usually those looking to make a drastic change during uncertain times are much closer to their expected retirement. It’s understandable, but more often than not doing so only makes things more difficult.

A well-thought-out financial plan helps determine the proper asset allocation to stock market exposure and mitigating market risk.

Ultimately, it helps to take your emotions out of the decision-making process. That is why it is so important to have a trusted financial adviser who can help you weather the storms and offer you professional advice — especially when things get shaky.

Granted, there are times when your plan and your portfolio will need to be re-evaluated and most likely changed, like when a child enters the picture or an inheritance from an unexpected passing. However, unless your situation has substantially changed, trust the agreed-upon plan laid out by your financial adviser and the active management of your asset allocation, which is very important during market fluctuations.

Younger investors usually are not as nervous during volatile times, because they have more time to bounce back. However, inexperienced investors can get spooked just as easily as those nearing the end of the tunnel.

In fact, during such times it is smart to put more into a 401(k) or other investments, if possible. It is an opportunity — it’s on sale! Veteran investors know this, which is why ones with cash are buying into the market when it goes down.

The key to successful investing is looking at things long term and making sure your objectives are still met. The market bottomed out this year on March 23. During this time of market uncertainty, I talked to a lot of clients. Because we had a plan, they stayed invested and some even added money.

I cannot stress how important it is to develop a relationship with your financial adviser, so they become someone who knows you and your situation. Besides helping you set retirement goals based on your lifestyle and dreams, they need to know your wants, needs and wishes — what upsets you and makes you nervous, i.e. what’s going to spook you.

You are not going to get that from an online trading platform or an app. Those things don’t account for major setbacks, like a job loss or divorce. Financial advisers account for those variables and create a plan with structures in place that can be shifted quickly, if needed.

I know my clients. I see them at the farmers market, grocery store and ballgames. I know them and have the ability to walk with them through life. I expect the unexpected so they don’t have to worry about the “what ifs.”

Times like we’re experiencing now make people focus. We don’t know what the market will hold, but solid planning and good judgment are going to work if you stay the course. Your plan is the foundation for your future. Let it take you there.

Barbara Still is a senior client advisor for Arvest Wealth Management in Fayetteville. The opinions expressed are those of the author.