Concerned about the recent market volatility? Listen to John Woolley, Managing Director of Wealth Management, and Wealth Planning Manager Lauren Reed talk it through, and then read their commentary below.

TPG Commentary: Investment Goals vs. Financial Goals
Investment markets have had a rough year so far. Such volatility can cause us to lose sight of what is most important: our long-term goals. Compounding this, volatility can also cause us to focus on investment goals rather than our financial goals. Though they may sound similar, they are not the same.

An investment goal is performance relative to a benchmark over a specific time period. Simply put, investment goals are met if they outperform a chosen index. An index is a basket of investments whose prices are measured consistently over time. One of the most followed indexes is the Dow Jones Industrial Average (“The Dow”), a group of 30 large companies in the US chosen to represent various segments of our economy. The S&P 500 is another index composed of the biggest 500 public companies in the US. The Bloomberg Aggregate Bond index is, as it sounds, an index representing the broader bond market. As you can see, there is an index for just about anything, but it is also important to remember that any index is just a collection of data. It isn’t something you can invest in directly. So, even though we use many index funds in our client portfolios, they are close approximations of the investments in them but will not have the exact performance of those indexes.

A financial goal is one anchored in your own, specific financial plan. Examples of financial goals include funding retirement, saving for education or travel, or leaving a legacy for heirs or charities. Financial goals are grounded in planning projections and tied to real outcomes. They are unique and personal to us. If we meet an investment goal but fall short of our financial goals, what have we really accomplished?

During this period of volatility in the investment markets, we recommend returning to your financial plan and the financial goals that are built into it. Each time we review a financial plan, we use a tool called sensitivity analysis. This tool runs your plan 1000 times using a random path of market returns and has in its data set the last 100+ years, including The Great Depression, stagflation of the 1970s, record interest rates of the ‘80s, the tech bubble, and the 2008–09 Great Recession, to name a few. The swings of the markets are not new, and we model them in your plan. In short, your plan has been stress-tested under these scenarios and more, so we think it’s fair to take a good deal of comfort in your planning outcomes.

We understand the headlines are incessant and alarmist, but none of them are specific to your plan and your financial goals. Instead, recognize them as investment noise and turn to your planning work for comfort. If you haven’t completed your financial plan with us, we’d enjoy the chance to get started on one with you. We are here to discuss that work anytime you would like, so please reach out with any questions or concerns: We appreciate hearing from you.


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