Last week, I discussed the elusive pursuit of portfolio returns – at what point are you satisfied with the returns in your portfolio, when it seems all your friends and co-workers are chatting up the leading industries’ top stocks?
In other words, at what point is “enough, enough?”
For Coffeehouse Investors, “enough” is accomplished when you capture the market’s benchmark return. As Vanguard’s late founder John Bogle was fond of saying, at that point you “Capture your fair share of the market’s return.”
An additional benefit of knowing you are capturing your fair share is that it allows you to focus on your financial plan instead of the markets.
For those of you who are contemplating retirement, focusing on your financial plan is critical in today’s volatile markets. To put it bluntly, retiring during a bear market is not for the faint of heart.
In Wall Street jargon, you are dealing with one type of risk few investors contemplate. It is called “sequence of returns risk,” explained here.
The Details Matter
If you have already factored this risk into your financial plan, the bear market should have minimal impact on the long-term sustainability of your portfolio.
If you haven’t factored “sequence of returns risk” into your portfolio, it’s time to re-evaluate, and maybe even re-create a new financial plan that works for you, as pointed out in this timely article by Tara Siegel Bernard.