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Financial Planning in a Volatile Market

Financial Planning in a Volatile Market

October 26, 2022
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In 2022 we have experienced one of the more arduous markets in recent years. Although we cannot see into the future, if history is any guide, we can forecast several things: over the long-term the markets will move positive and interim market movements will always be unpredictable. A well-designed financial plan incorporates the critical assumption of market volatility- and for good reason. Here are three key points to keep in mind for financial planning in a volatile market.

It is important for financial plans to be conservatively developed for times like these. 

 Instead of projecting historical investment returns of 8% - 10%, a more modest projection of 4-6 % is often used. This leads to a more conservative estimate of future income streams. Inflation is typically included at a rate above the long-term average to overestimate living expenses in the future.  Conservative assumptions help to develop a financial plan that will overshoot objectives but can provide a greater sense of security. Investment management plays a key role in the implementation of any plan and provides the means to generate income during and following a bear market.

Good financial plans are dynamic.  

As time and goals evolve, your plan may change also. Life changes in addition to market changes can affect your financial goals. Although there is no way to predict what exact mix of assets will return the greatest rate for the next decade, you can build a plan that accounts for the different challenges – and rewards- that various markets generate.  

There is still opportunity for financial planning in a volatile market.

For long term investors, market downturns represent an opportunity to purchase at discounted prices and position investments to take advantage of the eventual recovery. For retired investors there can be a concern that time is not on your side and you could be worried that you do not have time to wait for the rebound. The best laid plans can be derailed during volatile markets by this sentiment. 

Emotions can distract from goals by causing you to deviate from your plan. Instead of allowing market gyrations to dictate your actions, we encourage you to look to your plan for guidance. A well-designed plan can offer analysis of various scenarios so that you make rational decisions during challenging markets.

It is crucial at this time to focus on the importance of having a long-term plan, even though it may feel tough to remain committed to your strategy. Financial planning and the incorporation of historical perspective provide a foundation for staying the course and enduring periods of market distress. If you have worked with us on your financial plan, stick with it, and make sure it is updated as your goals shift.  If you have not worked with us to develop your financial plan, you could be missing out on the sense of security that a financial plan can provide.  

Marshall Financial Group is a SEC registered investment adviser. Information presented is for educational purposes only and for a broad audience. The information does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed.  Marshall Financial Group has reasonable belief that this marketing does not include any false or material misleading statements or omissions of facts regarding services, investment or client experience. Marshall Financial Group has reasonable belief that the content as a whole will not cause an untrue or misleading implication regarding the adviser’s services, investments or client experiences. Please refer to https://adviserinfo.sec.gov/ for Marshall Financial Group’s ADV Part 2A for material risks disclosures. Past performance of specific investment advice should not be relied upon without knowledge of certain circumstances of market events, nature and timing of the investments and relevant constraints of the investment. Marshall Financial Group has presented information in a fair and balanced manner.