In the song, Taking Chances, Celine Dion asks, "What do you say to take chances, what do you say to jumping off the edge? Never knowing if there's solid ground below, or a hand to hold, or hell to pay, what do you say?" The reality is that risk is a part of everyday life. Unfortunately, even something as mundane as crossing the street or commuting to work is not always a sure thing. That uncertainty is even more apparent when it comes to investing. The stories of market speculation that have dominated the news recently serve as a cautionary tale for us all.
When it comes to creating a personalized financial strategy, it is critical to understand what you might consider an acceptable risk level. In the past, assigning risk usually involved stereotyping based on age, profession, and other subjective measures that may have worked for some but often missed the mark and resulted in unnecessary anxiety for others.
Fortunately, technology has the ability to positively impact how we live our lives, and the financial planning sector is no different. Over the next few newsletters, Prosperity Wealth Planning will introduce you to some of the technology tools, new and old, that we use to help our clients achieve their financial goals. In keeping with this issue's theme, we will look at a new tool that helps assess comfort with financial risk – Riskalyze.
Riskalyze utilizes a simple, straightforward five-minute questionnaire, covering topics such as portfolio size, financial goals, and what you're willing to risk to achieve your goals. Your answers are analyzed to define your Risk Number (i.e., your comfort level). The Risk Number is then used to help develop a strategy that aligns with your preferences and priorities. Ultimately, it leads us to a plan that will feel more in line with your expectations.
Interested? Let’s schedule some time to determine your personal Risk Number. Here’s a link to our online scheduler – the most convenient way to plan your appointment.
It's important to keep in mind that risk can be mitigated through diversification, and fluctuations in the market historically smooth out over time.
Source: The Bumpy Road to the Market's Long-Term Average, Dimensional Fund Advisors
Since 1926, the US stock market has rewarded investors with an average annual return of about 10%. But it's important to remember that returns are subject to many factors and, as we saw in the last year, they can be sky-high, extremely poor, or settling somewhere in between.
- Annual returns were within two percentage points of the market's long-term average of 10% in just six of the past 95 years
- Yearly returns have ranged as high as +54% and as low as -43%
- Since 1926, annual returns have been positive 70 times and negative 25 times
Understanding the range of potential outcomes can help you stick with a plan and ride out the inevitable ups and downs.
News and Upcoming Events (March and April)
- March 31 – End of Medicare General Enrollment Period - Last day to apply for Part A and B
- April 15 – TAX DAY!
- April 15 – Last day to contribute to Roth and Traditional IRAs
- April 22 – Coffee with Carolanne
SAVE THE DATE for the first Coffee, Cabernet, or Cocktails with Carolanne. Think of it as a combination of getting together virtually to catch up with some old friends as well as an opportunity to learn more about timely financial planning topics. The subject for this meeting will be 2021 Tax Planning strategies. Be on the lookout for more information as we get closer to the date.
Financial Planning Articles of Interest
|Think Investing is a Game? Stop.|
|5 Steps to Understanding Your Risk Tolerance|
|It's Tax Season, 8 Steps to Take Before Filing|
I invite you again to schedule some time with me to use our newest technology tool, Riskalyze, so that we can get you to a comfort level that will work for you now and in the future. I'll leave you with the words of Dale Carnegie, who said, "Take a chance! All life is a chance. The man who goes farthest is generally the one who is willing to do and dare".
All the best,