When you experience strong markets for two years in a row, it’s easy to get caught up in the frenzy and lose sight of long-term historical precedent and your investment goals. In light of this, as we enter this new year, it’s beneficial to reaffirm your top investment goals and guiding philosophy during this critical phase of your life:

  1. Cash Flow: If you are retired and no longer receiving a paycheck, then the first goal is to provide consistent short-term cash flow every month, including funds for cars, home improvements, gifts, and vacations. Aside from your good health, if you don’t have the necessary cash flow to do what you want, where you want, when you want, with whomever you choose, life is not as enjoyable as it could be.

    It can be beneficial to consider keeping several years’ worth of your anticipated withdrawals in money markets and less volatile bonds so you are not put in a position of having to sell your broadly diversified stock index funds when temporary market forces are not in your favor. It’s important to discuss with a financial advisor to determine if this is the best approach for your situation.
  2. Long-Term Growth: Focus on long-term growth to help grow your purchasing power and generate the cash flow you need to keep pace with your rising lifestyle costs (due to inflation). Earning the long-term investment rate of return you need is not a bonus. It’s a necessity to maintain the ideal lifestyle you have worked so hard for.

    In stark contrast to stock picking, short-term trading, and market timing based on forecasting, we believe in an evidence-based philosophy for the rest of your investment allocation. This strategy is focused on capturing the higher expected long-term returns of broadly diversified and strategically allocated stock index funds, which represent thousands of value-driven, profit-seeking companies in the United States and all over the world.
  3. Tax Efficiency: Finally, to be tax efficient, i.e. strategically reduce your income tax burden to the amount you are legally obligated to pay, while still satisfying your cash flow needs and accomplishing your growth goals.

    You have the right to only pay the taxes you are legally obligated to pay. It’s your money. You created the value to earn it. You exercised the discipline and dedication to save it, and you deserve to derive all the benefits from having done both successfully.

Staying on track with your investment goals requires a system, a structure, and the discipline to stick with it through all market conditions.

All of this is critically important to keep in the forefront of your mind as more financial media “noise” rears its ugly head the next time markets turn.

Here’s to another great year!

This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Savant.

Author Jack Phelps Managing Partner / Financial Advisor

Jack has been involved in the financial services industry since 1989. He is the author of "The Relaxing Retirement Formula: For the Confidence to Liberate What You’ve Saved and Start Living the Life You’ve Earned."

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