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Read this post for insights about cryptocurrency investors and real-life financial planning. Also, check the website for a video about inflation and interest rates!
Financial planning involves more than investment management
As a general rule, you want to align your investments so you can achieve your financial plans.
Conversely, you do not want to align your financial plans based off your investments. Especially in times when investments are volatile, it is impossible to change plans so quickly. Yet we are inundated from nearly every media source about bad news and worse, the actions we should take with our investments.
It is not realistic to think anyone can predict short-term changes in the economy or with investments, or interest rates. It makes sense to first come up with your real-life financial plans and then, only after that, your investment portfolio.
The cryptocurrency crash
Think of the cryptocurrency billionaires, now bankrupt one month later, and what fanciful financial plans they might have held.
If they had a realistic financial plan, they would have set aside enough of their crypto into actual investments. By actual investments, I mean, of course, a well-diversified portfolio. Perhaps they could buy a home, or pay off a mortgage or other debt. Had any of the crypto speculators hired a financial planner, and then taken the advice, they would likely have a better outcome.
Let’s consider another example. Some of our clients take on exceptional risk – often inadvertently – with a concentrated equity position. They keep money in their own company stock, or they are owners of privately-held companies. They build up their wealth with a business. Our recommendations usually run along these lines:
• First let’s secure your family’s financial health.
• Second, let’s enable you to take significant financial risks for potential outsize returns with your concentrated equity.
That common-sense approach amounts to building and then maintaining a financial plan. We set aside this amount of money, for this amount of time, and you have enough to reach your goals, help your family reach their financial goals, and live within your values.
Learn more
For more information about how we might be able to help, check out our Concentrated Equity web page.
Also, check out our Quantifying the Value of Financial Planning Advice downloadable document.
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