Transcript of Video:
Eric: Well, we have all been noticing the stock market has been taking some wild swings lately. Up one day and down another. So how does that impact you, the average investor? Kurt Pearson from Compass Financial is here to help us take a deep breath. So how are you and I, just normal people on the street, being impacted by all these things?
Kurt: Well, it obviously impacts specifically our retirement account, and that’s one thing that people notice. They get their 401k statements – usually quarterly – and if they’re checking on it more often than that through their online vendor, they can really begin to notice some of those swings. Now sometimes it’s tempered, that their actual return is tempered, because of the consistent money that’s coming out of their paychecks and buying more. And so it’s very important for people to drill down into their exact numbers and to know exactly, “Hey, how does my actual return compare to what’s going on in the broader stock market?”
Eric: So we’re supposed to take the emotion out of decisions. But that is hard. How do we actually do that? Make good financial decisions, while not being too worked up about it?
Kurt: Well, I think it begins, Eric, with knowing our financial plan. In other words, if we have projected out what we are going to need our money to do for us to get to the retirement goal or to save for the kids’ college or whatever, and we have a targeted return, then we know how that targeted return compares to what’s actually happening over the course of a quarter or a year or a five-year period. So it really begins with knowing your goals, knowing your financial plan, and knowing what targeted return you really need to make that financial plan work.
Now we really think that having a dividend as part of that return is very important, because typically, dividends, although not guaranteed, they can be very consistent and can be a more predictable form of a return. And so that can help ease and alleviate some of those wild swings and what’s actually going on with share prices.
Eric: Can be a little bit safer. Okay.
Eric: So with all this volatility, when you see those big down numbers on the screen, that can be scary. But is there a chance that some of those down numbers can actually help us in the long run?
Kurt: Well, yeah, there’s always a positive spin to the volatility, because volatility does create opportunities over time. And so, again, it’s very important for people to look under the surface, look at the bigger picture, if you will, and say, “Hey, how could I use what’s going on to my advantage?” Again, with their financial plan and their targeted return in very clear focus.
Eric: And you’re talking about plan. You can’t just stick your head in the ground. You have to be aware and have those meetings and make good decisions.
Kurt: Yeah. I think that’s very important. I’ve heard the way some people deal with the volatility is just not to look at the statements. We’re not a proponent of that. It’s very important to look at it, and to understand how each piece of your portfolio and of your 401k is responding and reacting during a volatile time period.
Eric: It can be scary, but you have to deal with it straight upfront.
Eric: Thank you so much, Kurt. If you have any questions for Kurt, you can give him a call at Compass Financial Services. That number is on the screen, 515-327-1020. Thanks, Kurt.