Five Lessons To Remember During Bear Markets

The Stock Market has been trying to teach these lessons forever…

The real value of a bear market may be that it gives investors, who are temporarily frozen within its grip, the opportunity to learn or relearn important lessons regarding risk and diversification.

For savvy investors, a bear market also creates a period for looking beyond emotional headlines and studying the hard facts – facts that can ultimately place them in a position to take advantage of coming opportunities.

Periods of falling equity prices are a natural part of investing in the stock market. Bear markets follow bull markets, and vice versa. They are considered the “ebb and flow” of wealth accumulation.

Staying Calm Can Pay Off

Bear markets create apprehension in the minds of many people. That’s natural. However, any feelings of anxiety should be balanced with reason for anyone seeking financial success.

Anyone dubious about the need for a stable outlook should consider that virtually every bear market was followed by a better than average annual rate of return from the subsequent bull market. 

Five Lessons to Understand

Instead of taking a “time out” from the market, and missing out on potential opportunities, investors should focus on five key lessons the market has repeatedly been trying to teach everyone during its naturally occurring economic cycles:

  1. Periods of falling prices are a common part of investing in the stock market.

  2. An investment’s value will be greatly influenced by fundamental factors, such as profit and revenue growth.

  3. Diversification, while it does not assure against market loss, often provides the safest haven against the ebb and flow of changing markets.

  4. Invest over time, rather than make single lump-sum purchases. In other words, falling stock prices are the friends of dollar cost averaging investors (of course dollar cost averaging cannot guarantee a profit or protect against a loss in a declining market).

  5. Take a long-term view when investing in the stock market. Short-term fluctuations are natural. (The investment price and underlying business often have little to do with each other over the short term.)

Planning Matters

Remember that you’ll be inundated with all kinds of economic information during both bear and bull markets.

There will be reports, for example, about inflation, interest rates, and unemployment figures that may entice you to either give up on the stock market or invest in it to the exclusion of investments paying relatively smaller returns.

To avoid being lured to either extreme, develop a financial strategy that accounts for risks you find comfortable.

Review your investments on a regular basis to help ensure they are still relevant to your overall financial plan, and that you’re staying on track.

Then trust yourself and stick with the plan.

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Will Rising Mortgage Rates Slow Down Housing?

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Will Rising Mortgage Rates Slow Down Housing?

Housing prices have increased every single month for the past 12-years

The housing market has been frustrating for buyers and a boon for sellers, but there are signs that those frustrations might be easing – depending on where you live.

Would-be buyers have struggled with historically low inventories, crazy bidding wars and now have to add rising mortgage rates to their worry list. Sellers on the other hand have been rejoicing as average housing prices continue to increase month-over-month and year-over-year, with average home prices jumping 15% in the last 12 months.

But sellers also face a dilemma: where do they go if they do in fact sell? And while there are signs that 2022 might see some cooling off, there are also signs that the relief will be too little – and maybe not at all in certain markets.

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Retire on Purpose to Get the Best ROL

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Many new retirees feel lost without their jobs. But often what these struggling folks are really missing is the sense of purpose that their careers gave them. Even if you didn't love everything about your job, work gave your days structure and a sense of meaning as you put your skills to good use and provided for yourself and your family. That's why our Life-Centered Planning process puts such a strong emphasis on preparing you for the transition away from work and into a new phase of life where purpose itself can be redefined, and even deepened. 

Answering these two questions could help you find that purpose and keep getting the best life possible with the money you have in retirement. 

 1. What is important to me?

Under normal circumstances, new retirees often spend weeks, months, or even years taking stock of their lives and reassessing their priorities.

The pandemic, and now the war in Ukraine, have accelerated that process of reflection for many retirees. When the future feels uncertain, we tend to cling to the things that we do feel sure about: our loved ones, our passions, the goals that we want to accomplish.

The good news is that those foundational elements of life are exactly what seniors can build their retirement around. Even if you decide to take a part-time job, you'll have some flexibility to include the people and activities that make your life meaningful in your new retirement routine.

For many, an ideal retirement week mixes smaller, everyday pleasures with progress on long-term goals. You might schedule a couple afternoon lunches or rounds of golf with retired friends around the online classes you're taking to earn your Master's. As you're preparing for that big "bucket list" trip to Europe, you could make a few extra weekend trips to watch your grandkids play baseball.

There's no right or wrong way to orient your retirement around the things that are most important to you, and in many cases the process involves some trial and error. Our life planning tools can help you gain clarity on what really matters. Then, we can filter those things into a draft of your ideal week in Retirement.

 2. How can I use my resources to make a difference?

Three of the most valuable resources a retiree has are money, energy, and time. Many of our clients have told us that the older they get, the more value they assign to those last two.

Which isn't to downplay the importance of money. You should be proud of all the hard work you put into building your nest egg. Now that you're no longer focused on saving and investing, embrace the possibilities for fun, relaxation, connection, exploration, and purpose that your money provides.

 But also think about the causes that could benefit from your generosity, the issues in your community that you could improve with a sustained charitable giving plan, the legacy you could leave by starting your own family foundation.

Then, think about how you can move beyond money. Your favorite local nonprofit might appreciate your gratis marketing or web security skills even more than your monthly support. If you especially enjoyed helping new workers find their feet during your career, you might become a tutor or mentor.

Making strong connections between your resources and what's most meaningful to you will be key to discovering your purpose in retirement. The process isn't always easy, and it rarely follows a straight line. But it can be one of the most rewarding journeys you'll take. We're always available to help you plan for the next step and your ultimate destination.

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Plan to Maximize the Most ROL Today and Tomorrow

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The last couple of years have been filled with uncertainty and many people have been concerned about their future. This often leads to a feeling of stasis when it comes to how we think about our money. But improving Return on Life isn't something that happens in an undefined future. ROL is an ongoing process that allows you to balance in-the-moment enjoyment with your family's long-term security.

Here are three ways that you can leverage your financial plan to find your balance and start enjoying your money more.

1. Give Yourself Permission to Spend

Old-fashioned financial planning puts a heavy emphasis on saving and investment goals you need to hit on your way to retirement. Folks who follow this model are often extremely focused on "hitting a number" above all other financial considerations. Often that means living more frugally and working longer than they really need to.

A healthier approach might be to pay yourself first by making automatic monthly contributions into your retirement accounts, budgeting for the month's expenses ... and then having a little fun! Yes, a solid financial plan includes setting some limits and monitoring your progress. But within those boundaries you should still have room to replace your old car, build that backyard swimming pool, or take a family vacation you've been putting off for too long.

2. Build-Up Reserves

One of the golden rules of financial planning is: "Plan for what you know is coming and prepare for the unexpected."

To that end, we often advise our clients to create a special savings reserve, ideally in a separate bank account. These are the funds that you will rely on if you or your spouse suffer an unexpected job loss, or if you have a sudden medical emergency, or if your home needs a repair that insurance doesn't cover.

Sometimes these funds are called "emergency buckets," but there could be more positive situations where you'll appreciate having this reserve. For example, perhaps you need a little extra support as you transition to a new career. Or maybe you use reserve funds when you retire early and need to pay health care premiums before you're eligible for Medicare at age 65.

Your reserves should be able to cover 3 - 6 months of your living expenses. Setting a long-term goal and filling that bucket with a comfortable cushion can provide real peace of mind, especially once you retire.

3. Prioritize

If you have the resources to improve your Return on Life now but you don't feel free to enjoy yourself more, you might need to reassess your relationship to your money.

One question we often discuss with our clients is, "What is your money really for?" The ultimate purpose of money isn't to keep earning more of it. Your money is supposed to be a vehicle that takes you from where you are right now to where you want to be. And, hopefully, along the way, you use your money to take some pitstops where you can enjoy the sites, the people, and the activities that make your life worthwhile. Too many people who wait for "the right time" to enjoy the rewards of a lifetime of hard work find that "the right time" never comes.

Are you having trouble connecting your time and your money to your top priorities? The $Lifeline tool can help you prepare for upcoming transitions. Schedule a call and let's start planning to make every stage of your life as fulfilling as possible.

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How To Measure Your Portfolio in Uncertain Times

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How To Measure Your Portfolio in Uncertain Times

Too often during uncertain times, we inadvertently compare ourselves to the people around us – and that leads us to make financial mistakes. In his book Predictably Irrational: The Hidden Forces That Shape Our Decisions, Dan Ariely remarks, “We don’t have an internal value meter that tells us how much things are worth. Rather, we focus on the relative advantage of one thing over another, and estimate value accordingly.”