Friday, January 21, 2022

Roseanne Rosannadanna



Ask The CFP® Practitioner
Darcie Guerin

“If you want to go fast…go alone. If you want to go far…go together.”African Proverb


Question: My financial affairs are in good shape, although they might be a bit random and unintentional. I know I need a plan, yet I’m afraid that if I do make changes I’ll do something wrong. World affairs are so volatile, the economy is uncertain, interest rates are low and the stock market is so high; what should I do?


Answer: It sounds like you’re in the right frame of mind to prioritize, organize and gain some perspective. You’re immediate concerns aren’t uncommon yet just because there is always a reason not to take action; it is wise to review your financial situation. As Gilda Radner’s Saturday Night Live character Roseanne Rosannadanna would say, “Well Jane, it just goes to show you. If it’s not one thing, it’s another…”

We live in a global economy. When one part of the world is struggling, others may be thriving. Financial markets will always go up and down. Headlines haunt us with geopolitical instability, and yes, the world is uncertain. However, US consumers did pay down debt during the financial crisis and are cautiously beginning to spend. US corporations are gaining global market share and manufacturing is experiencing a renaissance. Technology creates opportunities and takes us places we could never imagine. These are all positive trends showing that resilience follows vulnerability.

Measuring Success & Freedom

Many goals in life require money. Since the majority of us have limited resources, we need to prioritize between wants and needs. Financial freedom and peace of mind generally materialize for us when we identify income sources, live beneath our means, establish an emergency fund, allocate excess resources to investments, and reduce losses while harvesting profits.

Remember that your success isn’t measured by an index. The benchmark to gauge your success is just that, your success, not the markets or a rate of return.

Fear, greed and doubt encourage us to make irrational choices. Cash may feel safe and risk free because there’s no risk if you’re not in the market, right? Wrong. Taxes and inflation are thieves that erode purchasing power and reduce the real value of cash over time. The key to success is customizing your portfolio to match your needs, goals and comfort level.

Your recipe for success is unique and will reflect your appetite for risk. Diversification is an investment principle designed to manage risk. However, diversification does not guarantee against a loss or ensure a profit. The key to diversification is to identify investments that may perform differently under various market conditions.

For instance, a stock portfolio that holds a computer company, a software developer and an internet service provider is not well diversified. All three stocks are connected to technology. A portfolio that includes other sectors of the economy besides computer technology may be considered more diversified. Investments that don’t react the same way to circumstances and situations are said to have a low a correlation. Investments with low correlations won’t have the same up or down trajectory path. Highly correlated securities defeat the purpose of diversification.

Don’t Sink Your Ship

Chinese merchants managed risk by filling each ship in the fleet with a mix of the same goods rather than loading any one vessel with one item. If a ship sank or pirates attacked, equal amounts of goods were on all the ships ensuring that the remainder of the commodities would reach their destination, thereby reducing the potential for total loss. In contrast, the Spaniards famous Atocha’s fleet had two ships out of their fleet sink in 1622. These two vessels were carrying the mother lode of riches causing a severe financial setback for the Spanish economy which could have been avoided through proper diversification. Your investments could benefit from that same logic.

Today’s economic environment is challenging. Along with this comes opportunities and potential rewards, but understand the risks. King Solomon, known for his wisdom and wealth — and wives — provided specific advice: “Divide your investments among many places, for you do not know what risks might lay ahead. Farmers who wait for perfect weather never plant. If they watch every cloud, they never harvest. Plant your seed in the morning and keep busy all afternoon, for you don’t know if profit will come from one activity or another-or maybe both.” My interpretation of this is to start saving and investing now, no matter what the conditions, and that diversification matters. Today’s economic environment is challenging making it important to review your financial situation to understand the opportunities, risks and potential rewards. Stay focused and invest accordingly.


Views expressed are the current opinion of the author, but not necessarily those of Raymond James & Associates. The author’s opinions are subject to change without notice. Information contained in this report was received from sources believed to be reliable, but accuracy is not guaranteed. Past performance is not indicative of future results. Investing always involves risk and you may incur a profit or loss. No investment strategy can guarantee success. “Certified Financial Planner Board of Standards Inc. owns the certification marks CFP(R), CERTIFIED FINANCIAL PLANNER(tm) and federally registered CFP (with flame design) in the U.S.” This article provided by Darcie Guerin, CFP®, Associate Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr.

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