Investment Planning for an Uncertain World

Apr 2, 2024 | Budget

Four older adults walking bicycles along a beach with the text "Investment Planning for an Uncertain World." The logo reads "Stewardship Trust Advisors.

Turn on the prime-time news on any given day. Pull up your favorite newspaper on your tablet. No matter how you get your news, chances are good that one of the top stories will relate to emerging risks around the world. It might b strife in the Middle East. Or you’ll hear about tensions with Russia. Maybe it’s the ever-shifting balance of power between global powers. No matter what you hear or see on today’s news, this much seems obvious: we live in a time of both unprecedented global complexity and the technological capability to watch events unfold in real-time. So, how does investment planning fit in to an uncertain world?

Investing in a Time of Geopolitical Risk

When large investment houses start talking about geopolitical risk, it’s probably a good idea to take note. Money managers usually spend little time discussing the possibility that foreign policies between countries could lead to destabilizing situations. However, at the end of 2014, the chair of RIT Capital Partners (a $3.5 billion fund) stated that geopolitical risk was “…as dangerous as any time we have faced since World War II…”

This dire warning might sound overly pessimistic. But that’s not necessarily the point. The important thing is that it reveals that large money managers are starting to pay a great deal of attention to global risk.

How should one address these risks? The past 100 years or so has been a time with more than its fair share of global instability. And throughout, we’ve seen that moving 100% into cash or government bonds hasn’t been the best way to achieve growth. Without moving into purely defensive investments and making overly conservative plans, how can you plan for tomorrow while being mindful of risks today?

Managing Risk – And Reward – For Long-Term Success

It is often said that without risk there is no reward. And when it comes to financial planning, this maxim is particularly true. For those trying to achieve long-term goals, such as retirement or estate planning, it’s often times risky to try and avoid all risks.

Being overly risk-averse toward stocks can result in low returns that hardly keep up with inflation. And this, in turn, increases the risk of running out of money before you die or failing to fully fund an estate. For most investors, cash and bonds alone don’t offer the inflation-beating returns needed to replace an income or provide a legacy to the next generation.

Fortunately, a smart financial plan, built in a way that takes into account global risks but still seeks long-term growth, can help avoid these overly cautious decision biases.

Is Your Plan Risk – and Reward – Aware?

With all the uncertainty in the news, now is a great time to evaluate your financial plan to see if it is managing risks in a smart way.

Does your plan:

  • Ignore the relationship between reward (investments) and risk management (insurance)? Or does it address both investments and insurance in a comprehensive way?
  • Diversify investments and insurance to provide multiple sources of return and income?
  • React to the latest headlines or take emotion out of the decision-making process?
  • Rely too much on one company or country? (Note: If your pension, 401k, and life insurance are all provided by your employer or heavily invested in one country, this can be a big risk.)

The best way to be sure your plan is well prepared for the risks and rewards of the global economy is to talk with a professional planner. After all, wouldn’t it be nice to watch or read the news and not worry about the negative headlines because you know you have the right plan – and the right planner – on your side?

Stewardship Trust Advisors Can Help

Working with an experienced financial planner allows you to tap into the high-level knowledge of someone deep in the investment world. But it also anchors you by giving you a guardrail against rash or anxiety-driven decisions.

At Stewardship Trust Advisors, we’re committed to helping our clients prepare for a confident future. We understand investment planning for an uncertain world. Ready to connect? Schedule a consultation today!

These weekly articles which are produced and distributed by Pilgrims Capital Advisors, Inc. contain information on topics about investing, tax planning, estate planning, asset allocation, insurance, and many other financial subjects. Please note that they are very general and must be applied to your circumstances through the services of a trained or licensed professional who specializes in these areas. If you have questions or needs related to the subject matter of this article please contact us by clicking on the link below and we will point you in the right direction.

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