Equity and fixed income markets will move up and down – this is normal. While we have seen increased volatility lately the direction of the market and to a lesser extent the month to month change in your account value is not that important. The questions that investors should ask is can they maintain their standard of living? Is their portfolio allocated properly based upon their individual current needs, long term objectives and risk tolerance?
Investors cannot buy the Dow or the S&P directly and most do not have holdings that only mirror these indices; they have diversified portfolio which may move in the same direction but not to the same extent as the market. Watching day to day or even quarter to quarter moves can distract you from maintaining a long term perspective. If you can maintain your standard of living and are not taking unreasonable draws from your portfolio then the direction of the markets does not really matter. Generally a reasonable level of withdrawal is 4% per year. The important question is can you maintain and enhance your standard of living over the long term.
We expect increased volatility as we approach the mid term elections. We also anticipate increasing inflation, interest rates and taxes over the next three to five years. It’s important to make sure that your portfolio is allocated based upon your individual needs, not the short term market trends. Please contact any financial advisor in the office if you would like to discuss your situation or if we can otherwise be of service