In my opinion, there isn’t much else to harp on regarding the recent actions in the markets.  As expected, things have bounced back a bit, the QE has officially ended, and the headlines have already shifted their focus past the Ebola outbreak, falling oil prices, and Eurozone woes and onto the holiday season for retail and the continued positive earnings reports.  Fickle is the 24/7 news media.

With that, I will shift focus in this missive as well since I have been struggling to find inspiration to write something meaningful about the markets this week.  On Tuesday I had the privilege of hearing some of the brightest minds at JP Morgan Asset Management talk about retirement, their outlook for Europe, asset allocation strategies, and fixed income strategies at the heels of QE ending.  I was showing my husband some of the resources and notes because I was so impressed and excited by my new found knowledge.  No offense to him, but I don’t think he was nearly as excited as I was.  However, it was in this information, I found some inspiration.

I think we have all heard a variation of the following saying:

“God grant me the serenity to accept the things I cannot change, the courage to change the things I can and the wisdom to know the difference.” –Reinhold Niebuhr

Which brings me to this diagram:

If your image is blurry, the brown bubble say Market Returns, Policy regarding taxation, savings, & entitlements (Out of Your Control).  The magenta bubbles say Portfolio Risk and Saving vs. Spending (Total Control).  The blue ones say Employment: earnings & duration and Longevity (Some Control).

See those brown bubbles?  Those are the ones where we spend an extraordinary amount of time and energy as planners and investors.  The focus needs to shift towards those magenta colored bubbles where we have control.  If risk is being appropriately managed for your personal goals and benchmarks, the market’s irrationality should not be something to lose sleep over.  If you are losing sleep over your investments, then maybe it’s time to take a closer look at the risk management.  As a side note, just because you are managing risk in a portfolio does not mean that investments won’t fluctuate up and down.

As we move into year-end, it is time to shift our focus away from what’s happening minute to minute on Wall Street and DC to the things we can do to make us more successful in our financial goals.  When was the last time you compared your portfolio’s returns to your personal benchmark?  When was the last time you assessed the amount of risk in your portfolio to achieve your goals?  Do you know what your personal benchmark is?  If you do not know the answers to these questions, then there’s no better time than now to shift your focus on what you can do rather than what you cannot control.

With that, I leave you with this parting thought:

“Risk is trying to control something that you are powerless over.” – Eric Clapton

Until next time,

Carolyn Menker

LPL Wealth Advisor

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.  To determine which investments may be appropriate for you, please consult us prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and cannot be invested into directly.

Economic forecasts set forth may not develop as predicted, and there can be no guarantee that strategies promoted will be successful.

Index definitions:

The Standard & Poor’s 500 index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.