When the Market Is Volatile, Why Is it Important to Have a Financial Plan?

By Amy Rohde, CFP®, CFTA, Senior Relationship Manager

Markets will always be unpredictable. Market downturns are painful but are a naturally occurring component of equity-market investing. A well-designed financial plan considers market volatility and can help you brave the ever-changing ebbs and flows of the market. If you do not have a plan yet and are just focusing on investing advice, you are missing out on the sense of security that a quality financial plan can provide.

Here are five recommendations for dealing with uncertain financial times such as these.

Have a Dynamic Plan
A good financial plan is dynamic. It is a living, breathing plan. It changes when there are major events during your life just as much as when there are market changes. Make sure your plan is updated as your goals shift.

Keep Your Emotions in Check
Something else that could potentially derail your best-laid plans: emotions. Emotions can distract from goals by driving you to deviate from your plan. Instead of letting market gyrations dictate your actions, always look to your plan for guidance. A good plan that is carefully laid out in partnership with your advisor should walk you through various simulations so you make rational decisions.

Re-evaluate Goals
During times of uncertainty, you can benefit from reevaluating your short- and long-term goals, while sticking with your financial plan. Having digital access to your financial plan that allows you to decrease (or increase) goals with the ability to see the real-time impact is extremely valuable and allows you to participate in designing your financial plan.

Test the Plan With a Range of Market Situations
We can’t predict the future of the market returns. But, you can test your plan across a wide range of market situations and returns.

Stress Testing a Financial Plan
It’s also important to be prepared for the uncertainties in the real world and see how a financial plan may succeed even when things go bad for a while.

Stress testing is a powerful way to illustrate how variability can affect your financial plan. Stress testing a plan shows several different possible outcomes, which helps reinforce the underlying uncertainties in projecting future results. If your financial plan has the ability to illustrate bad timing (a downturn in the market performance at a bad time such as two years before retirement) or bear market tests (how the plan would be affected by a severe bear market in bonds or stocks), these can be helpful in illustrating the impact on the plan results.

Key Takeaways
During times of volatility or amid a bear market, it is important to remember to stay focused on the big picture and on achieving your financial goals. This will allow you to endure the inevitable bad times with confidence. Keep your plan on track, especially in times of market volatility.

Amy Rohde is a Senior Vice President and the Key Private Bank Senior Relationship Manager in Fort Myers and Naples. She is a CERTIFIED FINANCIAL PLANNER™ and Certified Trust and Fiduciary Advisor (CTFA) professional. She can be reached at (239) 659-8812 or amy_rohde@keybank.com.

Any opinions, projections or recommendations contained herein are subject to change without notice and are not intended as individual investment advice. This material is presented for informational purposes only and should not be construed as individual tax or financial advice. KeyBank does not provide legal advice. KeyBank is Member FDIC. KeyCorp. © 2022. CFMA # 220916-1725778

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