Key Questions: When the Market Is Volatile, Why Is it Important to Have a Financial Plan?

Tina A. Myers, CFP®, CPA/PFS, MTax, AEP®, Director of Financial Planning, Key Private Bank

<p>Key Questions: When the Market Is Volatile, Why Is it Important to Have a Financial Plan?</p>

The Key Wealth Institute is a team of highly experienced professionals from across wealth management, dedicated to delivering commentary and financial advice. From strategies to manage your wealth to the latest political and industry news, the Key Wealth Institute provides proactive insights to help grow your wealth.

Markets will always be unpredictable. Market downturns are painful but are a naturally occurring component of equity-market investing. A well-designed financial plan considers market volatility and can help you brave the ever-changing ebbs and flows of the market. If you do not have a plan yet and are just focusing on investing advice, you are missing out on the sense of security that a quality financial plan can provide.

Here are five recommendations for dealing with uncertain financial times such as these.

Have a Dynamic Plan

A good financial plan is dynamic. It is a living, breathing plan. It changes when there are major events during your life just as much as when there are market changes. Make sure your plan is updated as your goals shift.

Keep Your Emotions in Check

Something else that could potentially derail your best-laid plans: emotions. Emotions can distract from goals by driving you to deviate from your plan. Instead of letting market gyrations dictate your actions, always look to your plan for guidance. A good plan that is carefully laid out in partnership with your advisor should walk you through various simulations so you make rational decisions.

Re-evaluate Goals

During times of uncertainty, you can benefit from reevaluating your short- and long-term goals, while sticking with your financial plan. Having digital access to your financial plan that allows you to decrease (or increase) goals with the ability to see the real-time impact is extremely valuable and allows you to participate in designing your financial plan.

Test the Plan With a Range of Market Situations

We can’t predict the future of the market returns. But, you can test your plan across a wide range of market situations and returns. Using simulations such as Monte Carlo analysis, which examine all the “what if” scenarios of your plan, you can see statistical results of the likelihood or probability that a financial plan will be successful. Monte Carlo is most useful as a “big picture” illustration of the probability of success of a plan.

Stress Testing a Financial Plan

It’s also important to be prepared for the uncertainties in the real world and see how a financial plan may succeed even when things go bad for a while. Stress testing is a powerful way to illustrate how variability can affect your financial plan. Stress testing a plan shows several different possible outcomes, which helps reinforce the underlying uncertainties in projecting future results.

If your financial plan has the ability to illustrate bad timing (a downturn in the market performance at a bad time such as two years before retirement) or bear market tests (how the plan would be affected by a severe bear market in bonds or stocks), these can be helpful in illustrating the impact on the plan results. Knowing this ahead of an actual occurrence can be comforting so that when these times do occur, there is less anxiety and potential for irrational decision-making that could negatively impact your overall plan.

Key Takeaways

During times of volatility or amid a bear market, it is important to remember to stay focused on the big picture and on achieving your financial goals. This will allow you to endure the inevitable bad times with confidence. Keep your plan on track, especially in times of market volatility.

Tina A. Myers Biopic

About Tina A. Myers

As the Director of Financial Planning for Key Private Bank, Tina is responsible for managing the Central Planning Team, as well as overseeing the National Advisory Committee, Monthly National Advisory Call and any financial planning literature developed internally and externally. She works with our Regional Directors of Planning to help facilitate our best thinking and advice delivery to clients.

Tina earned a B.S. in Bus. Admin. from the Univ. of Richmond and an M.Tax from Virginia Commonwealth Univ. She is a CFP® certificant, CPA/PFS, and is an AEP®. She is Treasurer of the Put-in-Bay Community Swim & Sail Program. Tina received the 2016 Exceptional Service Award from the Cleveland Estate Planning Council and the Circle of Excellence Award by Key Private Bank in 2016 and 2018.

The Key Wealth Institute is comprised of a collection of financial professionals representing Key entities including Key Private Bank, KeyBank Institutional Advisors, and Key Investment Services.

Any opinions, projections, or recommendations contained herein are subject to change without notice and are not intended as individual investment advice.

This material is presented for informational purposes only and should not be construed as individual tax or financial advice.

Bank and trust products are provided by KeyBank National Association (KeyBank), Member FDIC and Equal Housing Lender. Key Private Bank and KeyBank Institutional Advisors are part of KeyBank. Investment products, brokerage and investment advisory services are offered through Key Investment Services LLC (KIS), member FINRA/SIPC and SEC-registered investment advisor. Insurance products are offered through KeyCorp Insurance Agency USA, Inc. (KIA). KIS and KIA are affiliated with KeyBank.

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