The Benefits of Focusing on Your Long-Term Financial Goals

As your advisor, our main focus is helping you reach your long-term financial goals.  We say this a lot, but it bears repeating.  It’s worth revisiting because near-term portfolio returns and market noise can distract even the best investor from remembering why he or she invests in the first place.  For most of us, investing is about creating the life we want, giving back to family, friends, and community, and leaving a legacy.  At Parsec, our job is to lead you through difficult market periods, including times when your portfolio may lag the major market indexes.  Every portfolio will experience underperformance from time-to-time.  However, getting caught-up in weak near-term performance can actually hinder progress towards your long-term goals.

This happens when we lose sight of the big picture.  Asset class leadership naturally ebbs and flows over the course of any economic cycle, and so too will portfolio returns.  Financial behavioral scientists suggest that if we’re caught-up in near-term underperformance we’re more likely to act reactively instead of proactively.  Reacting to current portfolio performance increases the odds that we sell low, buy high, trade excessively, or even sit-out the next market run.  In other words, focusing on near-term market moves increases the odds that we hinder our long-term performance results.

In contrast, measuring your progress versus your long-term goals is more likely to increase proactive behaviors and thus improve the odds of realizing your objectives.  For example, framing portfolio returns in the context of your retirement savings target several years from now is more apt to help you keep calm during periods of market turbulence.  “Keeping your eye on the prize”, as they say, can cultivate resiliency and has the added benefit of lowering your anxiety levels.  When you’re less stressed, you’re more likely to engage in proactive behaviors like maintaining an appropriate asset allocation mix, rebalancing back to your target regularly, and staying invested during market downturns.

While we acknowledge that portfolio declines or underperformance is never fun, it’s important to recognize that difficult performance periods are par for the course.  Over time some assets and sectors will outperform while others will lag.  Rather than trying to time the market or catch the latest trend – which is extremely difficult to do – sticking with a diversified asset allocation and rebalancing regularly is a tried-and-true method for achieving your financial goals.

With that in mind, our job is to help you stay focused on the big picture.  Doing so lowers the odds of engaging in detrimental behaviors and increases your chances of success.  When you succeed, we succeed!

Thank you,

The Parsec Team

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