One month into the New Year, it’s a good time to reflect. What financial lessons did 2015 teach us?
- Volatility rules the day: Don’t think the stock market rollercoaster ride will be over any time soon. “Volatility in the equity markets is here to stay for at least the first six months of 2016. With all the shifting in monetary policy around the world, the markets are unsettled,” says Michael Kramer, a portfolio manager on Covestor, and founder of Mott Capital Management in Garden City.
- Be patient: “Lower your expectations. Stick to a realistic, long-term plan and assume a reasonable rate of return,” says Paula Brancato, wealth management advisor for Northwestern Mutual in Manhattan. If your portfolio is 60/40 stocks to bonds, a 4 percent to 5 percent annual return over a 10-year period is a reasonable expectation, she says.
Think long-term and don’t get caught up in emotions, advises Zoie Silver, a portfolio manager with Beacon Trust in Morristown, New Jersey.
- Have a fat buffer of savings: With instability, don’t leave yourself financially vulnerable. “Pay down your debt, but not to the exclusion of long-term savings,” says Brancato. Be as aggressive with saving as you can stand.
- Watch interest rates: Last year the Fed raised rates and they’re not finished. “If rates continue to go up, the bond funds will start to go down,” says Kramer.
- The bottom line: Says Joseph Camberato, president of National Business Capital in Bohemia: “Prepare for the worst, hope for the best.”