It is uncomfortable when you turn on the news and hear the stock market is down. It can be painful to log into your account or open your statement and see a lower balance than you had the month or quarter before. So many times, I think how lovely it would be to have a crystal ball that would tell us when stocks are going to move up or down…that would be a way to even quicker wealth for everyone! Sadly, my teammates and I do not have the ability to look into the future and know what is going to happen any more than you do. But we do have the tools to navigate through volatility and help you feel more comfortable and confident in your plan.
Stocks grow wealth
While we do not know the day-to-day movements of the stock market – we do know the long-term trend and that is UP! We believe a diversified stock portfolio is the best way to grow wealth over the long run. We want to growth this wealth with your goals in mind – for you, for your retirement, for your future health care needs and to fund any legacy goals. We know that stocks are going to act up from time to time and you need just that – time for them to recover.
Stocks hedge inflation
We are seeing inflation in action – just go to the grocery store or take note of the Dollar Tree that after 35 years is raising prices on most products from $1 to $1.25. If your wealth does not grow over the rate of inflation, it is effectively shrinking. A stock portfolio is a great way to grow wealth over and above inflation. Other means folks use to hedge inflation can be a lot more volatile than stocks such as gold and other commodities and even cryptocurrency. A diverse stock portfolio can offer a smoother ride.
Stocks will go down and we have planned for times like these
At Harford Financial Group, we manage wealth in buckets and give each dollar a job. The dollars that are invested in stocks, including stock oriented mutual funds that many clients own, are dollars we do not plan to use for income any time soon. By giving these dollars a job, long term growth, we are going to plan for them to act up on occasion. In fact, we plan for markets to go down because history has shown they do!
Bonds and money market are part of your portfolio for a reason
We purposefully carve off part of the portfolio to be more conservative and it is this part that is so helpful to us in weathering the storm when stocks are acting messy. Bonds and money market positions in the portfolio allow us to create space and time for stocks to recover. So, we can use these holdings to help tamper risk and to provide income during turbulent times. These dollars are viewed as money on deck for distributions that may be used soon. Their job is to be more stable and provide income. Even with very low interest rates we want part of the portfolio to be in fixed income or bond funds because we need to plan for stocks to act up at the very worst time! We plan for stocks to act up at a bad time and that time is when you need to take a distribution. That is why we position those dollars earmarked for distribution in a more stable way, to give stocks that room they need to act up as they inevitably do from time to time.
It is the blending of stocks and bonds, equity and fixed income, in your portfolio that supports your goals – short and long term. Each piece is an important part of your portfolio. The balancing of the different pieces is done deliberately with your goals in mind and creates your personalized plan.