Making Dollars Out Of Sense by Ben Haas: A new normal? Or much the same?

Ben Haas

As we kick off another year, itís always interesting to see what has changed in the last 12 months. Iím guessing for many of you, much has changed. For some, the changes may be little, like new living room curtains or a new favorite outfit. For others, changes can be significant, like a new baby in the family or a new job. As I continue to talk about planning for my clientís futures, itís powerful to look back once in a while and remember how we got to where we are. Yet as I discuss this phenomenon with clients, Iím amazed at how quickly we forget the past. Why is that? Are we well conditioned to simply adapt to our new surroundings? Is it because we create a ďnew normalĒ for ourselves? Or are we so focused on our day-to-day lives that we loose sight of the bigger picture?

2013 was a strong year for the U.S. Equity markets! The Standard & Poorís 500 (An index comprised of the 500 largest US based companies; it is unmanaged and cannot be invested into directly) returned three times1 greater than its annualized average over the last 50 years! Is this the new normal? Or should we all take a deep breathe and recognize that what has been normal over the last couple years, is still normal; volatility.

Coming off an amazing year, itís tempting to think weíve somehow figured out the secret to investing Ė that strong gains will be the ďnew normalĒ. Itís easy for us to forget the mistakes of the past and just put everything in stocks as we press the cruise control into retirement. It sounds tempting, doesnít it? Iím exaggerating a bit. But Iím witnessing the behavior. When we reach a ďnew normal,Ē itís easy to become complacent, to think that this time itís different. But the fundamentals havenít changed. Investing can be volatile, and the market does not always go up.

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Itís still incredibly difficult to find the magic bullet. Itís still incredibly difficult to consistently find which side of the trade to be on. Itís still incredibly difficult for an investor to consistently get the actual investment return he or she seeks. When we forget that weíre still human and still likely to react to what we see in the news, weíre setting ourselves up for disappointment. Strong returns in 2013 donít guarantee that weíll be smart, well-behaved investors in 2014. Itís why I continue to stress the need for a financial-planning process instead of just a plan.

By engaging in a process, we put guardrails in place that help us manage the ups and the downs, both in the markets and our emotions. So go ahead and celebrate a good year, but donít forget what you said matters most to you. Thatís what should drive your financial decisions going forwardónot the ďnew normal.Ē

1- http://www.1stock1.com/1stock1_141.htm

Benjamin N. Haas, CFPģ, CRPCģ

Wealth Manager, Kutztown

US Wealth Management Lehigh Valley

bhaas@uswealthlv.com

Securities offered through LPL Financial, Member FINRA and SIPC. Investment advice offered through U.S. Financial Advisors, a registered investment advisor. U.S. Financial Advisors and U.S. Wealth Management are separate entities from LPL Financial.