Experienced skiers know that, no matter how many times you head down the same mountain, no two runs are ever the same. The snow may transform from powdery to sticky to slushy. The weather may be overcast and windy one day, then sunny and crisp the next. As skiers, we also change; we may be older, more skilled, calmer, anxious, or preoccupied. Every ski day is a new experience. Whether hour to hour or visit to visit, we traverse a different mountain every time we head down the slopes.
Investing is similar. We never invest in the same market twice. The economy shifts, first growing, then stalling, and even slipping into recession. Valuations may differ; they may be cheap, moderate, rich, or bubbly depending on timing. Interest rates vary—increasing, holding steady, or declining depending on economic conditions. We invest at varied times in our lives, perhaps saving for the future, planning for retirement, or living on our assets. Our personal circumstances change—we may marry, become parents or grandparents, divorce, or lose a spouse. Over time, the markets change, and our approach to investing also changes. Such modulations make relationships with our financial advisors critically important.
Being aware of both shifting environments and the individual financial perspectives of our clients allows us to build portfolios that are right for the moment. Just as skiers continuously shift our weight and change the pressure we apply to each ski as we head down the mountain, skilled investing is a series of continuous adjustments based on conditions that are right for the investor based on current circumstances.
This focus on “now” helps our long-term perspective, too. When skiing, we have to focus on what’s right in front of us. If we look too far down the mountain, we may ignore immediate conditions, lose balance, and even fall. Similarly, as investors, we must make decisions based on current market conditions and valuations. Trying to predict markets’ future movements is impossible and dangerous. We make decisions based on the valuations and conditions that exist now—not by trying to guess the future.
Changes along the way
Just as markets and conditions change, so do investors. Whenever you have a life event, your asset allocation should be evaluated in the context of that event. Life events have both a financial and psychological impact; each must be considered.
When we retire, the financial impact is that our primary source of income is changing. Retirement income streams may be coming online and assets in retirement plans become available. These financial changes have some impact on our asset allocation.
However, retirement’s larger impact is often psychological. Living on a portfolio accumulated during a lifetime of disciplined investing may change risk appetite, making a more conservative allocation appropriate. When a retiree is checking how the stock market did that day in order to decide whether or not to go out for dinner, the portfolio is likely too aggressive.
As you plan for the future, whether you are carving the groomers or hitting the bumps, we are here to help you make the best run possible. Please contact me or your wealth advisor with any questions.
Important disclosure information
Please remember that different types of investments involve varying degrees of risk, including the loss of money invested. Past performance may not be indicative of future results. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments or investment strategies recommended or undertaken by RegentAtlantic Capital, LLC (“RegentAtlantic”) will be profitable.
Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request.
This article is not a substitute for personalized advice from RegentAtlantic. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.
RegentAtlantic does not provide legal or tax advice. Please consult with a legal and or tax professional of your choosing prior to implementing any of the strategies discussed in this article.