Financial plan a way to help you through market instability

 

Uncertainty in the financial markets is distressing for us as we look for ways to grow our savings. The media coverage and commentary from multiple sources adds to our anxiety, sometimes causing us to make rash decisions.

One way to take control is to create a financial plan. Setting out your goals, remaining actively involved in the management of your portfolio, and diversifying your investments should help you not make poor investing decisions at the spur of the moment.

Set your financial goals

Before you invest any amount of money, you need to ask yourself some critical questions. These questions will help you create a road map that you can follow (and act upon) in times of crisis or uncertainty.

For example, you may want to save up to buy your first home. To meet this goal, you will need to understand the timeframe you intend to buy, the type of risk you are willing to take with the money, and the kinds of financial products or strategies you can use to get there.

We’ve got a list of questions in our Informed Investing section that you can ask yourself. There is also a worksheet on the webpage that will help you start planning your investments. We also talk about risk and products in this section of the website.

Remain actively involved
For many people, this is the hardest part about investing. It’s very easy to walk into an investment advisor’s office, hand over some money, and walk out thinking that you are taking care of your retirement. The problem with this approach is that the headlines from the past week cause the same person to call up the advisor in a panic to tell them to “sell everything.” As I said off the top, this could be a bad idea that hurts you in the end.

Monitoring a portfolio and understanding investment products does take time and effort. But, it’s worth it. You don’t have to become an expert. You just have to know enough to be able to talk with your registered advisor, set out your goals, and ask questions to make sure they have you on the right path.

You should meet with your advisor regularly, and always check your statements. This will keep you both in sync, and allow you to make informed decisions even when things look dim.

Diversify your investments
You shouldn’t have all of your eggs in one basket. Once you’ve set out your plan and your risk tolerance, you can start to look at investment products and strategies. As you move forward, you will want to ensure that your portfolio remains balanced and in tune with your current goals and financial situation.

Your advisor will help you find the right mix for your needs. However, you still need to ask the right questions about the kinds of investments in your portfolio.

Our InvestRight Guide to Investing provides worksheets with questions to ask. You should never be afraid to ask a question when you don’t understand something. It’s your money.

Final thoughts
In the end, it comes down to having a plan. This will allow you to make calm, informed decisions.

Also, the Globe and Mail’s Rob Carrick wrote an article titled Some do’s and don’t for investors in this market. He outlines some common sense portfolio strategies for retail investors who are worried about market losses.