fi nancialforum Market Declines I
Investment Planning A good investment plan identifies your financial goals and assigns a dol- lar figure and time frame to each. Then, you can select the proper invest- ment instruments to sup- port those goals.
In part one of this two-part series about stock market corrections, Lt. Col. Shane Ostrom, USAF (Ret), CFP®, discusses managing your portfolio based on your risk tolerance.
In late August, as this column was being written, there were stock market fl uctuations. Some fi nancial journalists and analysts would call this a correction (aka a signifi cant drop), while others will say there was no correction. Who should you believe? And does it matter? Those saying yes will point to the fact
that the stock market was on a rip since March 2009, the historic average timeline indicated we were due for a correction, and data showed the stock market was overvalued (too expensive). Those who say no will say the stock
market was not overvalued, according to their data, and the sluggish economic data facilitate the stock market’s continued rise. I’m not going to off er any predictions,
nor have I in the past. Instead, I’ll provide some general planning guidance to consider when managing your stock portfolio. I generally recommend a planning
process that manages to the risk — what- ever the risk might be — in meeting your long-range fi nancial objectives. You can’t know what will happen in the short term, but planning for the long term is another matter. If you assume your port- folio risk is because of the stock market (now or in the future), that’s what you should manage to. If the stock market takes a 50-per- cent hit tomorrow (or any time), how will that aff ect you fi nancially? Will you care? Many will say, “Of course I’ll care!” However, your answer to this really
should depend on where you currently are in life. For example, if you are work- ing, making regular contributions to your 401(k)/Thrift Savings Plan/individual retirement account, and still years from full retirement, a down stock market is good for you fi nancially, because only in a down market are you increasing your future wealth by purchasing greater amounts of ownership.* On the other hand, if a stock market decline will cause you immediate fi nan- cial pain — you will sacrifi ce a current retirement income source or you risk running out of assets before the end of your or your survivor’s life — reevalu- ate your fi nancial plans, strategies, and portfolios now to account for a market decline before it occurs. It’s important to remember that your
fi nancial plan shouldn’t require constant oversight and adjustments to your port- folios based on current conditions and predictions. If you have proper fi nancial planning based on your objectives, a stock market decline is never a concern, because your fi nancial plan already ac- counts for that prospect. In part two, in the November issue, we’ll look at specifi c ideas for managing risks to meet your long-term objectives.
MO
— Lt. Col. Shane Ostrom, USAF (Ret), is a CFP® and benefi ts information expert at MOAA. Visit
www.moaa.org/fi nancialcenter for other re- sources. Email specifi c benefi t and fi nance inqui- ries to
beninfo@moaa.org.
*online: Read more by searching for “Practicing What I Preach” at
www.moaa.org/financialfrontlines. 48 MILITARY OFFICER OCTOBER 2015
PHOTO: SEAN SHANAHAN
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88