These are challenging times. Challenging times call for prudent planning and a solid grasp on both long and short term financial needs. In designing an investment solution that is aligned with a client’s long-term plan, there is an ongoing, cooperative, and robust balance of:
o Market risk – the risk that stock prices will decline
o Inflation risk – the risk of losing long-term purchasing power
o Longevity risk – the risk of outliving money
Clients can be overwhelmed with the investment ‘advice’ being thrown at them from a variety of sources. While recent news certainly has not been good, many of these sources are focused on capturing viewers or readers and selling advertising (CNBC had record ratings in 2008). Unfortunately, the message is almost solely focused on market risk and doesn’t encourage a client to consider the bigger picture. As an advisor, I’m in the unique position to fully understand a client’s situation and help them understand that while they may wish to lower their exposure to market risk, doing so would increase inflation and longevity risks.
This may feel better in the short term but the long term effects can be devastating. Red Rock is different than most other firms because we focus on providing an unbiased, comprehensive solution for each client’s personal situation. The question isn’t whether or not changes should be made in the portfolio given what’s happened; the question is whether or not the investment solution is aligned with the client’s personal, comprehensive plan.
There is a bigger picture, and falling prey to the “talking heads” spewing financial “noise” can have substantial and negative impact on your long term planning.
Greg
