Find Your Financial North Star
The star Polaris, known to most of us as the North Star, is the celestial point around which our entire sky turns. It has been a signpost for centuries, guiding sailors across the Atlantic Ocean over five hundred years ago.
During times of uncertainty, it is easy to forget our guideposts. When you think about your financial objectives, I encourage you to identify your own financial North Star. Knowing what you need to focus on will allow you to create a financial roadmap that is deliberately designed for your goals and values.
As uncomfortable as it has been, the recent market volatility is not unusual. That is what markets do and have always done. However, it did come on the heels of something pretty unusual: a 6+ year bull market. The last time this occurred was in 1898!
Over the past few years, we got used to the market’s upward trend. It became easier to brush off memories of two big events in recent financial history, the tech bubble of 2001 and the Great Recession of 2008-2009. But we have a great opportunity to learn from them instead of letting their memories get smaller in the rearview window.
It is not abnormal for the stock market to fall for several days, weeks or months in a row. There are many times when stocks fall two years in a row. Yet when it happens, human nature tells us to do something. What did you do in 2001 when the tech bubble burst? Or during 2008 and 2009? Perhaps you were rewarded for gutting through the discomfort and sticking with your long-term investment strategy. Or maybe you discovered that you aren’t wired to own a high proportion of stocks and are vulnerable to making emotional decisions during choppy markets.
Before the stock markets declined 10%, I hope that you made a decision about the relative amount of stocks, bonds, and cash that feels right for your risk tolerance and financial goals. If you did, you should probably stick with that strategy through these turbulent times.
If you did not, now is the time to fully think through your risk tolerance and financial goals. Educate yourself, read a financial planning book or make an appointment with Meridian to review your account. I would not make any big moves in the middle of this latest market drop.
My advice for everyone is very simple. Stay calm. We never make good decisions in panic mode. Avoid the talking heads on TV because they are fixated on the short term. Dismiss anyone who says they can predict what is going to happen next. If they really knew, they would not tell you.
Stocks might decline further in the short term. Once you locate your investing North Star, you will not worry about daily, monthly or yearly fluctuations. Patience and self-knowledge will prevail.
As always, call or email me with any questions that you have.
This column appeared in last Sunday’s Knoxville News-Sentinel. You can read the column online here: Identify Your Own Financial North Star
Meet the Author
Tom Coulter, CPA
Tom is the President and a founder of Meridian Trust. Tom graduated from The University of Tennessee, Knoxville, in accounting with honors, in 1978. Tom previously worked for the international accounting firm, Deloitte. He later joined the financial medical advising firm, FIS Associates, before founding Meridian Trust in 1997. Tom has worked extensively in retirement planning, taxation, estate and financial planning and investment management. He is a Certified Public Accountant, a member of the American Institute of CPAs (AICPA), and the Tennessee Society of CPAs (TSCPA).
Tom is also credentialed as a Personal Financial Specialist (PFS) by the AICPA.