As I sit and write this eNews message, 8.49% of 2016 is now over. To say that 2016 has had a turbulent start may be an understatement. To provide you with some clarity as to what has taken place this year so far, I would encourage you to watch some of our update videos that have been prepared with you in mind.
These videos are a great way of gaining clarity without the "emotional theatre" so often attached to economic news that is delivered to us on the television and/or in the newspaper.
"For those prepared in advance, a bear market in stocks is not a calamity, but an opportunity." - Sir John Templeton
What the first 31 days of the year has taught us is that we clearly need a plan we can always turn to for solace. A plan that clearly articulates your distance from financial freedom. A plan that lays the foundation to build on as you move closer to financial freedom. A plan that when regularly reviewed, will communicate to you how "on track" you are. The recent market events are providing us all with a great opportunity to recalibrate our plan.
Now, I've never been a real advocate of rebalancing a portfolio on any scheduled frequency (it just never made sense to me as to why we would want to sell something that was performing well for another asset that was not), but a financial plan recalibration can (and should) be done when the opportunity presents itself.
So, what makes the most sense to me now is to inventory your entire net worth and ask yourself one question: "How much of my net worth is in variable return assets?" In the majority of cases, you will see that close to 100% of your net worth is in a variable return asset (e.g. real estate, stocks, bonds, etc...).
The short answer as to why this is probably the case stems back to where we have come from thus far in our financial journey. We have come from an environment where interest rates were simply a lot higher than they are today. This simply allowed us to generate a very reliable yield from assets that were considered "safe." Since the returns were compensating us for the small amount of risk we were taking by acquiring a "safe" asset that had a variable return, we felt comfortable with the accumulation of those assets.
However, we can't plan our future while making decisions on what happened over the past decade. We must look forward and educate ourselves on what is likely going to happen over the
next decade.
I can appreciate that nobody has a crystal ball that is always 100% accurate and have never encouraged "crystal ball gazing," but, the one thing that I will tell you is that moving forward, the peace of mind that will come from protecting more and more of your net worth from negative performance without sacrificing consistent returns will be truly empowering.
This is where we will be spending a lot of our time this year - in incorporating financial planning solutions that will provide you with more and more downside risk protection.
So, stay tuned as we move forward and try to make your plan as bulletproof as possible.
