I recognized the importance of a good lead on the dance floor at my niece’s wedding.  Even though I like to dance, I was grossly out-matched by my brother-in-law, who dances at a level worthy of Dancing with the Stars.

When we first stepped on to the floor, I scrambled to keep up with him, unsure of what was coming.  But the longer we stayed out there, the easier it became to anticipate what the next move was going to be.

A good advisor is like that strong lead that makes the difficult steps seem natural and effortless.  And the right lead can change the body’s initial response from flailing to swaying along.

How do I know this? Because in spite of the recent stomach-turning market volatility, these are the questions clients have been asking:

• Should we change anything? When I explain the plan doesn’t change unless the time horizon, the goals or the money being contributed into the plan has radically changed I’m told, “That’s what I thought, just checking.”
• Should I increase my contributions? Great thinking!  Several clients were highly motivated and upped their contributions this week, including many skittish teachers who kept putting off contributing more to their 403(b) plans.
• Is now a good time to make a contribution to my IRA? Absolutely!
• Should I start funding (or increase funding) my child’s 529 College Savings Plan? Yes, buying at lower prices means owning more shares.  And, if you receive a state tax benefit for funding the account, even better!

It’s not easy to think this way during uncertain times.  But there have always been tumultuous occurrences in our history.  Pearl Harbor and September 11 are but two of said moments and the world adjusted, adapted and moved onwards.  Always.

Following headlines and sound bites (designed for readership and views) is a sure-fire way to create a plan to shoot yourself in the foot.   Such a misstep might take years to recover from.

Investing is not easy because staying focused on the end goal requires tuning out near-term calamities. That is where the value of a good advisor and a thorough financial plan shines.

Some people may be panicking (and rightfully so) because they have no plan in place.  At the most basic level, make sure you have accounted for:

– Shorter-term needs (five years or less) by having cash/fixed income positions that can easily satisfy these expenses.  Why? Because having adequate cash reserves eliminates the need to sell stocks in a volatile market.

– Longer term goals (10 years away or more) require being invested in stocks, but there is no need to take on more risk than is needed.  None of our clients has a 100% allocation to stocks.  Why?  Because having a portion invested in fixed income (cash, bonds) can reduce some volatility without compromising the ability of the portfolio to grow.  It can help maintain a cool head and keep cash ready to rebalance the portfolio back to its original allocation (by buying asset classes that have gone down in value).   Needless to say, the longer one’s time frame, the higher the allocation to stocks (and vice versa).

While a plan may not eliminate the queasiness caused by a bumpy market, I saw it prevent our clients from being deterred by the noise of the moment. The leap made in the minds of our clients was to view volatility as an opportunity to pivot; not to panic.  The question became what is the best move given this situation?

There are opportunities; namely:

• If you are contributing to a retirement plan every paycheck, take comfort in the fact that volatility means cheaper prices/more shares. If you are not contributing the maximum to your plan, now would be a good time to increase what you are contributing.  For 401(k)s and 403(b)s you can contribute up to $19,500 ($26,000 for those age 50 or older).  For Simple IRAs the limits are $13,500 ($16,500, for those 50 and over).
• If you have maxed out your retirement plan, now would be a good time to contribute to an IRA or Roth IRA (you have until April 15, 2020 to fund an account for 2019). Maximum contribution amounts are $6,000; or $7,000, for those age 50 or older.
• Consider refinancing your mortgage. 30-year and 15-year rates have come down nearly a full percentage point from just last year.  A reduced monthly payment can increase monthly cash flow (and enable more savings to be put into retirement accounts).

The big choice you need to make is whose lead to follow. An advisor who puts your interests first has made it his/her life’s work to keep you making the right steps.

This relationship may change the way you approach challenging times, and help you to be nimble when others are tripping over their own feet, dancing to the noise of someone else’s tune.