During the unsettling financial times that we are experiencing today, many investors are concerned about what to do to protect their family.

The best solution is to have a written financial plan that creates a blueprint or map to guide your financial future. There must be coordination between investments, taxes, Social Security, legacy planning and all of the other elements in a comprehensive financial plan.

You must consider each individual part as a portion of a whole symphony and not just a bunch of rouge soloists going in different directions. That is how a masterpiece is created. All good orchestras have a good qualified conductor to facilitate the outcome.

This week we will discuss investments, but remember you cannot look at them in a vacuum without considering how they fit into the whole plan. There are three elements in every investment; liquidity, return and risk. The best investment would be something like a guaranteed 20% return, FDIC insured, and you could withdrawal any amount of needed funds tomorrow.

Unfortunately, such a product does not exist in the real world.

In fact, there is no product where you can get all three elements of an investment in one. The stock market has historically produced the best returns. If you have a brokerage account, you can sell part of your investment and have the funds in a week, so it is very liquid. You can never be sure what part of your money is available due to market swings, so there is a lot of risk.

While there is no good time for a stock market correction, there is a worst time. That is right before or early in retirement, when sequence of risk can destroy retirement. We will discuss that more in a future column.

Too many investors are underestimating the risk because of the current bull market we have been experiencing since 2009. Corrections are a part of stock market investing and most corrections are not three months like March 2020. The lost decade in the U.S. was just 20 years ago. If you invested in the SP 500, it took 12 years to recover your investment – if you took no money out during that time. While that seems like a long time, it is pretty short when you consider the Japanese Nikkei 225 suffered major losses over 30 years ago and still has not completely recovered.

People concerned about market risk should consider other investment opportunities.

Banks are not currently the answer for long term investment because of the low interest rate environment. They are where you keep emergency money and money needed for short term purchases. Having too much money in banks is a good way to lose money safely in the current high inflation world. I know that is an oxymoron, but it is true because of loss of purchasing value.

Financial products are one area of the economy where you don’t often see things go on sale. Sometimes you will hear about a high bonus for a limited time. This is probably not the best way for your family to manage its financial life. You do not need a hodgepodge of unconnected financial products. You need a coordinated financial plan created by a financial specialist who will create a comprehensive plan covering all elements.

If you see someone emphasizing a big bonus, of maybe 30% or more, realize this is probably not real money. No company can instantly turn $100,000 into $130,00. They would not be able to stay in business if they did. This extra $30,000 is in some special account that you cannot get in a lump sum or walk away with and may take as long as 10 years to be locked into your income account. When it is pointed out that you get 50% more than some index, severe restrictions must apply.

Accessing money through 10% free withdrawals comes from your real money account not the income account, but it is reducing this secondary account proportionally so you may not see any bonus on that money.

All companies are dealing with the same structural issues such as low government bond rates, internal cost and other things.

This means if one company stresses one area to get your attention, they have less flexibility in other areas. This does not mean that there might not be some uses for these types of products, but they should be part of a holistic plan that takes multiple meetings to access your family’s best outcome.

This plan should be created specifically for your family by a full-time fiduciary who is required to look out for your family’s best interest and not some product salesperson who is holding six seminars over the next two weeks and does not have time to meet with your family for anything but to sell a product.

Sometimes buying something in haste is not the best solution for your family.

Your Financial Future is written by certified financial planner Gary W. Boatman, MBA and CFP, who also wrote the book, “Your Financial Compass: Safe Passage Through The Turbulent Waters of Taxes, Income Planning and Market Volatility.” If there is an area that you would like to see discussed in the column, send your suggestions to [email protected].

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