As a financial advisor, I recently had an enlightening conversation with a client who is set to retire next year. During our meeting, he expressed a desire to eliminate volatility from his investments moving forward. This was quite a curveball, as a core strategy of his and his wife’s financial plan involved investing in equities to combat the long-term effects of inflation. Removing volatility would mean eliminating stocks, which would derail their entire plan.
We discussed the situation further, and it ultimately boiled down to a choice: he had to decide which discomfort he was willing to accept. He could either face the short-term uncertainty of the market or continue working longer than planned. There was no perfect solution, no silver bullet.
He quickly chose to accept the market’s short-term volatility.
While this might seem like a story about stocks and risk tolerance, it actually highlights a broader principle, beautifully captured by the economist Thomas Sowell:
“There are no solutions. There are only trade-offs.”
This quote perfectly encapsulates the essence of our discussion. In life, especially in financial planning, every decision involves trade-offs. Understanding and accepting this reality can lead to more informed and balanced choices.
Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/ SIPC.
This is a hypothetical situation based on real life examples. Names and circumstances have been changed. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments or strategies may be appropriate for you, consult your advisor prior to investing.