This Week’s Blogger: Scott D. Heins, CFP®, IAG Chief Investment Officer
Last week Friday’s snow created an excellent educational opportunity.
My middle child was granted his driver’s license by the State of Wisconsin in September. His mandated 50 hours of parent driving time started a mere 6 months prior to that and, as luck would have it, last spring was void of significant snows.
Thus, he had never experienced driving on snow or ice before. That changed on Friday night.
I had him drive to an unplowed parking lot and take the car for a spin (literally). He practiced accelerating, braking, cornering, and fish-tailing. He learned how the anti-lock brakes sound and feel so he does not take his foot off the brake when they engage.
Then I asked him what the two most important factors are when driving in winter weather. He came up with less speed right away, but it took a bit of coaching to come up with maintaining extra distance between the car in front of you.
When driving in winter, we take as many safety precautions as we can – clearing off the windows so we can see, driving slowly so we can steer and stop in time, and increasing our following distance to reduce risk.
Yet we still have no power to control other drivers, just like the financial markets.
We can design as appropriate a portfolio as we can for your personal financial goals – budgeting for the correct amount of investment and inflation risk, striving for tax efficiency to let you keep more of what you earn, and rebalancing along the way to try and stay on course.
Yet we still feel powerless when the impulsive short-term traders create the wintery market conditions that create crashes. It often appears that the financial world is out of control.
But experienced investors with long-term plans understand that short-term feelings about losing control are the cost of higher return potential that comes with investing. While the traders may make life difficult in the short-term, the financial markets are simply a long-term tool that permits investors to earn higher returns than cash over long periods of time.
Our investment approach is to prepare for slippery market snow every day of the year. We focus on limiting investment risk for investment assets that you will or may need to sell for cash flow within the next three years. We focus on keeping up with inflation for assets you may need for cash flow in 4-7 years. We focus on growing a diversified portfolio of volatile stocks for assets you do not plan to use for cash flow in 8+ years.
The next time you are out driving in the snow, be sure to understand and minimize the risks you are taking, know that others have not done the same, and strive to safely arrive at your destination – just like your long-term financial plan.
Securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through IAG Wealth Partners, LLC, (IAG) a registered investment advisor and separate entity from LPL Financial.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
Any opinions are those of IAG and not necessarily those of LPL Financial. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. No strategy assures success or protects against loss. Investing involves risk including loss of principal.
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