Daren Givoque, Financial Advisor
O’Farrell Wealth & Estate Planning | Assante Capital Management Ltd.
There is no doubt that these times are uncertain. The volatility of the stock market lately has proved that. Life is happening and it doesn’t care if you are close to retiring, buying a house or having your first child. It’s times like these the people really start to worry about what their future might look like.
However, amid all the fear and anxiety could there be a silver lining?
When times are good people tend not to pay attention. Have you ever driven home from work and realized you don’t really know how you got there? When the road is straight and predictable people tend to go on autopilot and react in ways that are easy and comfortable for them. But if you happen to hit a pothole on your regular route you will be jerked out of autopilot and forced to bring your cognition back online. After the initial shock has worn off you will probably be more deliberate and aware of your surroundings as you drive the rest of the way home.
The world has just hit a giant pothole. It is a great time to get out of autopilot, re-evaluate and look at your future financial goals. Here are three things you can do right now to help you feel more in control and refocus your energy into something that is productive and will benefit you in the long-term.
1. Look at your investments
Take a look at your investment portfolio. This could be a great time to replace investments that have not performing well in the past and to favour more defensive investments that will perform regardless of market conditions. You should always be rebalancing your portfolio annually but times like these are ideal for bargain hunting. The market is at a low so there are some great investment options that are relatively inexpensive. The main takeaway is to get rid of all the dead wood in your portfolio that isn’t serving you and stock up on options that are more likely perform well down the road.
2. Re-evaluate your risk tolerance
This is a great time to re-evaluate how you really feel about the ups and downs of the market. Often when people first set up an investment portfolio with a financial advisor, they tend to be relatively aggressive. They want to invest in the stocks that could give them the most bang for their buck - no matter the risk. However, when the market starts to go down, and investments decrease in value the volatility of the market is no longer a possibility. It is real.
It is important to take a look at how this makes you feel. Can you really withstand the ups and downs that come with a more aggressive portfolio or would it be better to invest in some more reliable options? No matter what it is a good chance to re-evaluate how comfortable you really are with risk and re-balance your portfolio accordingly.
3. Create a detailed plan
Do you have a short, medium and long-term plan? If not, this is the time to create a detailed financial strategy that reflects the goals you want to achieve. Goal-based plans are useful because they take into consideration what you want to accomplish over a certain time period. For example, if you want to retire at age 60 and are expecting a certain standard of living in retirement how are you planning for that? How much time and resources do you have to achieve this goal? This will directly affect your investment strategy as the longer the time frame the greater the level of risk you will be able to tolerate. It is important to reassess and adjust your plan 1-2 times a year to make sure you are on track. Life happens and your plan should reflect that so that you can continue to stay on top of all your goals.
This isn’t the time to give into fear. It is important to remember that there are lots of examples of challenges in the marketplace going back decades and, guess what? We always recover. The best thing you can do right now is stop, take a breath and have a good conversation with your financial advisor. At O’Farrell Wealth & Estate Planning we are all working from home, but it is business as usual. Give us a call to talk about how we can help you put together a plan that will make you feel in control now and into the future.