As 2020 draws to a close, I find myself sharing a thought I’ve heard from many others: “It can’t come soon enough.” Indeed, 2020 will go down as one of the most – what’s the right word here? – memorable years in a long time… and much of it for the wrong reasons. Regardless of how you feel about 2020, one thing is certain: no one predicted it.
Out of curiosity, I researched and re-read some of the market outlooks and forecasts for 2020 that I originally read last year around this time. Some of them were well written and entertaining. Some of them were filled with technical terms, charts and graphs. Some of them were optimistic, citing reasons the market would continue to rally. Some of them were more reserved and cited different reasons to exercise caution.
None of them predicted a global pandemic that would impact markets around the world, although they all predicted a U.S. Presidential election that was likely to be volatile. And while the election is (mostly) over, the pandemic is not, although there is promising progress on the development of a vaccine.
The point is, market forecasts – designed to guide investors on how to invest for the year ahead – should be taken with a grain of salt. No one has a crystal ball and no one ever gets it exactly right.
Does that mean they are not worth reading? Absolutely not. Again, they are often written by highly-qualified, highly-educated people who put a great deal of time, thought and research into them. They contain many ideas and predictions that sometimes prove to be generally correct and, even if not, are at least interesting to consider. (If you’re looking for a market forecast for 2021, we would be happy to send you one that we’ve found to be relatable.) [We could provide a link to the LPL Research 2021 Outlook pdf.]
It does mean, though, that you won’t find us authoring an outlook of our own. We would prefer to spend our energy not contemplating what could happen, but on creating plans for our clients that work regardless of what happens.
Life has enough uncertainty already, especially for retirees. How long will I live? Will I have enough money? What will my health be like? How will the markets and my investments perform? How will taxes and changes to the tax code affect me? Will Social Security and Medicare always be there? While we can’t answer these questions definitively, we can build a plan that addresses them.
We can present products and strategies that fit within a comprehensive plan designed to help our clients pursue their financial goals. For clients that are concerned about their investments, we have solutions that provide protection in the form of principal protection or guaranteed income. We will evaluate with our clients the threats to their plan and how to best minimize or transfer that risk through appropriate insurance.
But it all begins with our clients. We first need to understand their goals, desires and dreams, but also their concerns, worries and fears. With that in mind – and equipped with an inventory of their financial resources – we set out to help them pursue their goals through a clearly defined course of action. After all, success should be measured by an outcome, not a rate of return.
Read all the market outlooks you want. Then file them away under fiction. Regardless of whether you think a Biden presidency will help or hurt the markets or whether the pandemic will end quickly or drag on, the success of your financial plan should not depend on whether you – or anyone else – gets the prediction on the market right.
If you’d simply like someone to review your current financial plan and offer you a second opinion, we’d be happy to offer a complimentary appointment.