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Your monthly investment statement only tells part of the story Thumbnail

Your monthly investment statement only tells part of the story

Whether logging on to view your monthly statement or opening it when it arrives in your mail, you will see one of two things.

The value will be higher than the previous period or the value will be lower

If we assume this change is not due to adding more money into the account or taking money out, this change occurs because the value of the underlying investments have either risen or fallen.

Bear in mind that that value shown is for one particular day.  The last day of your statement. 

And it works both ways.  Let's say your prior monthly statement had an ending value of $500,000 (again, assuming no deposits into the account and no withdrawals) and this month's ending balance was $510,000.  Any rational person would deduce they made $10,000.  Not bad.

This is called a "paper gain".  Meaning the gain was not realized (You didn't sell anything).  Conversely, if your account went from $500,000 to $490,000 you had a $10,000 paper loss.  (Assuming you didn't sell anything)

When our long term investments go down in value (on paper) it isn't a good feeling.  We don't like seeing that.  We much rather our investments go up in value (on paper) month after month.  But, my friend, it doesn't work that way.

To get the kinds of long term returns we potentially can get when investing in companies of the US and abroad, we are required to take the ups and downs. These types of investments are not guaranteed of course however, have an asset allocation that aligns with one's personal goals and tolerance for risk is a good starting point.

Let's go back in time to the year 2008.  Most saw the values of their investments go down substantially (on paper, but still). Not a great feeling.

Many sold due to fear.  Fear of losing money, the world coming to an end or some other emotional reason. Those that sold turned these "paper losses" into "real losses".  The impact of those decisions potentially affected their whole financial well being.

There was one statement you did not receive in 2008.  A statement that showed the value of the home you lived in.  If you had, you could have seen the value of your $500,000 house go to $400,000. (Maybe more depending on where you lived)

This might have upset you but, you weren't planning on selling your house.

Why didn't most people sell their homes?  Because they needed a place to live. (And why isn't the current value listed on your mortgage statement each month?) 

Because it doesn't matter

Back to your investment statement.  Why should you not sell your investments just because they went down in value?

Pretty much for the same reason.  Locking in losses is not the best strategy.  A better one would be to have money set aside to cover shorter term expenses.

But Rick, what if I'm already retired and counting on this money to help supplement my other sources of income?

Well, if we prepared a financial plan and added in some contingencies for bad stuff happening and you still have a pretty high probability of success of meeting your goals, you should still be okay.

Having an emergency fund and a good handle on your monthly expenses goes a long way.

Also, were you planning on taking all of your money out of your retirement accounts in one day?  Or based on your financial plan, were you planning on taking the amount needed to cover your monthly expenses (over and above what you receive from other sources like Social Security, a pension perhaps, and maybe your p/t job).

Investing brings with it some emotions.  Fear, tops the list.  I'm not asking for you to not have any emotions surrounding your investments.  I'm asking you to reach out to me to discuss how you are feeling before making a decision that could be the biggest financial mistake of your life.

Remember, the one thing an investment statement doesn't tell you is whether you are on track to meet your financial goals.  Only a financial plan can do that.

Do I think we are heading to another 2008?  No.  Will we continue to see some increased volatility in the markets?  Yes.  Everyone's situation can be different so please don't hesitate to reach out to us with any questions or concerns.

Please feel free to reach out to me anytime for a conversation.

I'm here to help.

All the best.

Rick Fingerman, CFP®




Financial Planning Solutions, LLC (FPS) is a Registered Investment Advisor. Financial Planning Solutions, LLC (FPS) provides this blog for informational and educational purposes only. Nothing in this blog should be considered investment, tax, or legal advice. FPS only renders personalized advice to each client. Information herein includes opinions and source information that is believed to be reliable. However, such information may not be independently verified by FPS. Please see important disclosures link at the bottom of this page.


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