Keeping track of one’s financial goal
WHILE the world is said to be nearing the end of the pandemic, the rising global uncertainty, inflationary pressures and our own local government issues are hitting the market anew. The market price has been on a roller coaster ride, inching a bit higher to the 6,448 level (as of this writing), after a five-day decline. You may recall that the Philippine stock market already reached the 7,500 level around February this year.
As may be expected, these movements have made a number of our investors nervous and jittery again. This includes people who own life insurance with investment features (variable unit link) and who are probably feeling restless and anxious right now. Just like most Filipinos, they are concerned that just as they are starting to recover and rebuild their personal finances, this string of events will derail them again.
With this backdrop, it can be difficult but imperative that we stay calm and make informed decisions. One principle that I always try to follow is “never make big decisions when you’re emotional.” Because oftentimes, emotions screw up our decision-making process.
How do we then ensure our financial goals are on track amid these volatilities?
Be guided by your investment goals. When people become anxious and emotional over their investments, they often lose sight of the reasons why they invested in the first place. It’s never easy to see our investments declining right before our eyes … we palpitate, we want to stop the bleeding. This often leads to some irrational decisions being made.
What’s supposed to be a paper loss becomes a realized loss. We usually invest for our mediumto-long-term goals which require at least a 3 to 5 year time horizon. It’s usually for our child’s college education or for major purchases or for our own retirement. However, when jitters set in, we forget our timeline and redeem to cut the loss. Those who have been investing know from experience that following a significant dip, the market recovers after a year or two, which will still be well within our timeline.
As investors, sometimes we need to have tunnel vision. We need to set our sight toward the goal, losing our peripheral (or side) vision on distractions and temporary hurdles. When we are clear about our savings/investment goal, we can properly manage and avoid being sidetracked by sudden and temporary market movements.
That’s why honest to goodness financial planning should be done before we decide on any programs or plans. While some insurance and investment products can be purchased online, it is still strongly suggested to have a financial advisor to help you navigate and cushion the impact of market movements by discussing and adjusting your short- and long-term financial goals. Money for short-term and emergency needs should be kept
in savings or other guaranteed instruments. It should not be invested for a potential upside. Doing this is very risky and is a sure cause of sleepless nights and anxiety attacks.
Have the right Investment mindset. One of the best ways to stay sane, either in good times and bad, is to have the right investment attitude and perspective. When the market is up, we need to remind and control ourselves not to get too excited, as most would have the tendency to cash in already their gains, without a better alternative where to put their money in. On the other hand, when the market is down, just like now, we need to stay calm and stick to our financial goals.
Personally, I experienced the ups and downs of the market several times in the past two years. With it comes the emotional highs when the market is recovering and the emotional lows when the market is falling. I would have been a candidate for a heart attack already had I not developed the discipline of diversification and constantly taking a step back and appreciating what the market movements mean in terms of my personal investment objectives.
When the market price drops by 15 percent to 20 percent, it can really be alarming. But having a diverse investment portfolio will somehow cushion the impact, as various sectors and industries perform differently. Another investment principle that I observe, “never put your eggs in one basket.”
And for those who still have the luxury of time and have extra money, always remember that when the market is “down,” it is not always a bad case. It’s during this “downtime” when prices are on a bargain or discount, when markets go “on sale.” For those who have been investing and have experienced the full cycle, this is an excellent time for them to get in so when prices start getting up they’re already on the ride. This is the window of opportunity when the rich become even richer.
Be informed and stay in touch. These days, a lot of investors, especially the new ones, are confused, scared and frustrated. If you are one of those, do not hesitate to reach out to your financial or investment advisor, who is in a position to help you understand the market “noise” and make the right decisions. Aside from their financial or investment advisors, insurance companies have their customer service and marketing teams who can also clarify things for us. They will be more than glad to give assistance, either face-to-face or online. There’s a lot of fake news out there. It’s dangerous to be anchoring your investment decisions on unfounded opinion or hearsay. Better to get our source from the people or company who accompanied us in our investment journey from the start.
To all the financial and investment advisors, be there for your clients. The worst thing you can do during this time is not to reach out and make yourself scarce for your clients. Be proactive. Don’t wait for your clients to call you, call them. If no one is advising or telling your clients the real score, those fake news become their reality. If the news is not true, set the record straight. If it’s true, explain how it affects your client. They will not be happy for sure but many clients just need to be heard and be explained to what’s happening about their investments.
The months ahead will be challenging and interesting with so many possibilities. Anchored on more robust domestic activities, the Philippines is poised to still grow by 5.7 percent this year, according to the latest Philippines Economic Update. Characterized by lowering Covid cases, greater mobility of people, greater resumption of economic and social activities, the improving domestic environment is a source of hope that better days are coming and we are in for a good ride. Meantime, let’s be mindful to stay calm and focused on our money goals, have the proper mindset, and be in the know.