This headline wins the first “Reasons Why You Need A Financial Planner” headline award of 2013. Why is this so scarry? Because the equity markets are near their pre-crash highs after a trying 5 years in the markets. If small investors ran from the markets during and after the crash and are just coming back now, they have done exactly what people say they don’t do – buy high and sell low. How else do you explain selling as the market drops drastically then buying as the market is near the all time high?
A Financial Advisor helps with this in two ways – first, your advisor should be setting a strategy you can live with when the markets are good or bad, instead of reacting to the news of the day. Market Timing is an impossible game to win over the long term. An
“advisor” trying to time the markets is really just a salesperson preying on your fear and greed, not a financial advisor helping you plan for the long term.
Second, your advisor should keep you sane when the rest of the world is crazy by understanding your unique situation. If you are 30 years old and planning to retire at 60, whatever happens in the market today, tomorrow or next year will not impact your retirement. If the markets don’t recover for the next 30 years, we have bigger problems than not selling some stocks at the right time 30 years ago. If you are 75, retired and living off your savings, you are taking too much risk in the first place if market movements impact your ability to buy groceries or pay your property tax.