No Portfolio Without a Plan



Ukraine Crisis Continues

Two weeks ago I wrote about Putin's invasion of Ukraine.  Markets and investors were understandably concerned by such an obvious breach of international order.  The geopolitical impacts of this crisis will be felt for many years to come.

The S&P 500 entered "correction" territory, defined as a 10% decline, on February 23rd after Putin launched a full scale invasion of Ukraine.  Stocks have been volatile ever since and the gyrations are now being felt in markets for other key categories such as oil.  The uncertainty and volatility is likely to persist in the near future.

While the human scope of this invasion is tragic, the associated stock market volatility is not historically unusual.

Stock Market Volatility is Normal

10% corrections in the market are a common occurrence.  In fact, the average drawdown from peak to trough S&P 500 is normally 14% in any given year.  20% corrections happen, on average, about once every five years.  These are normal movements in the stock market and should be expected by any investor in stocks.

In my experience, all successful long-term investors are continually acting on a plan.  All the failed investors I've ever encountered up close were continually reacting to current events--and always the wrong way.

No Portfolio Without a Plan

We follow a pretty simple rule around here.  No portfolio without a written plan.  Your retirement goals lead to the development of a financial plan.  That plan then becomes the basis of how your portfolio is designed and managed.

We capture all of this in The Partnering Process.  During The Partnering Process℠ we seek to understand your long-term retirement goals, documenting them in a written document we call The Financial Wellcheck℠.  This written plan allows us to then design a custom portfolio for you which is further documented in your Investment Policy Statement.  

Why do we follow such a structured process?  So that you can have Clarity about your future and Confidence that your goals will be achieved.  While current events make short term headlines, our long term retirement goals remain unchanged.

What is a Retiree to Do?

The best time to prepare for a storm is before it arrives, not after.  Our retirees have all been through The Partnering Process with us, and had their portfolios built with a dedicated Stability Bucket to get them through challenging times in the market.  

Portfolios should be built in anticipation of volatility, not in response to it. Our “Stability Bucket” is a disciplined approach to taking the emotion out of retirement investing. We determine your withdrawal needs for the next five years and immediately set those aside in a low-volatility Stability Bucket. Any remaining assets are invested for longer-term appreciation in a diversified “Growth Bucket.” In a bear market, the money in your Stability Bucket will help you ignore the temptation to sell growth investments at fire-sale prices.

With five years of cash flow adequately protected from volatility, our retirees can confidently go about enjoying their retirement, confident that the storm will pass and their portfolios will resume growing at an appropriate rate in the coming years.

Looking Ahead

The Ukraine crisis has upended markets for now, and will have future geopolitical implications, but the market effects will eventually pass.  Countries and companies will eventually adjust, as rational players always do.  

We've been helping clients prepare for, and thrive in retirement for over three decades. Our clients' continued financial success is exceeded only by their success at the game of life.

When we build retiree portfolios at Oxford, we seek a balance between Stability and Growth following the principles outlined in our proprietary Power of 5 Investing system. Our goal is to help clients achieve inflation-beating growth in their wealth, while managing through market downturns, ultimately helping clients leave a legacy to the people and places they love. Our system has been battle tested in 25+ years of market ups and downs and is ready for whatever the market can throw at it.

If you're concerned about how your retirement portfolio may be impacted by events in Ukraine, we can help.  Click the button below to setup a free Get Acquainted meeting.