What to do now with the current rocky economy and investment markets? (Archived Blog)

The news reporting on the economy, the investment markets and the political situation in Washington and around the country sure have felt rocky this summer.  If we take a look at the numbers it’s easy to explain why. 

As of August 4th we officially hit market correction territory; correction defined as a 10% or more drop from a previous high. We’ve recently experience a 6% market value decline, in one day, only to be followed up with a market gain of 5%, the very next day, which was again followed-up with a couple more days of this whipsaw action.  These types of market swings, pre 2008, were essentially unheard of and if they did occur, they signaled trauma in the markets.  Post 2008, while they are not the same cause of alarm, they are certainly uncomfortable and are an indication of precarious times we are in. 

On a positive, and more optimistic, note we are up 15% year over year as we draft this letter.  The volatility of this market is a keen opportunity for the long-term investor which is good because it’s likely to continue for the foreseeable future.  We say this about the volatility because, we, as a nation, have some challenges ahead in terms of the political and economic landscapes.

The opportunity in this market we speak of is highlighted when we focus on the long-term and employ appropriate portfolio management practices such as regular rebalancing and sticking to the rules of the investing game described next.

Rules #1: focus on those things we can control.  Rule #2 stay focused on our goals.  Rule #3 separate our short-term money from our long-term money, and most importantly, rule #4 don’t let your emotions cause you to react to the “news of the day”

How do you best stay focused on and follow the rules?  Use your resources; more specifically, use us, your LFP team.  If you have questions, ask us.  If you have concerns about of something, talk to us.  Here at Lighthouse Financial Planning are focused on helping you stay focused and achieving your goals.  We diligently study and discuss the economic issues at hand and are ready to make adjustment based upon conclusions we reach.

If you are one of our clients who’s retired or is about to, we understand these rocky times are cause for concern especially when your livelihood depends upon your portfolio.  Rule #3 is especially important in our conversation with you.  As we review your portfolio this month, careful attention is being paid to your goals and cash flow needs for the next three-ish years.

For our clients who are still saving and accumulating for goals further, say beyond three to five years, rule #2 and #4 are the focus for you.

So, how are things in your life?  We can best do our job for you when we know how you are doing and about changes.  Please contact us for any reason or to simply chat.

Then, enjoy life.  Smell the roses. Spend time with loved ones. Strive to not get sucked into the day to day noise and sensationalism promoted by the media. Have a great day!

Jim & Debbie

Our Thoughts About Yesterday's Stock Market Sell Off (September 23, 2011) (Archived Blog)

The Federal Debt Ceiling (Archived Blog)