Many experts today will tell you that volatility, measured as standard deviations of returns, represents investment risk. We at Telarray are skeptical that something as complex as risk can be reduced to one simple number, and even if it can be, risk to an individual security is very different than what risk means to an investor looking toward the future.
Clients at Telarray experience the Observatory process about once a year, which gives us a chance to think together about risk. As you know, we like to stress scenarios with more spending, fewer working years and other adjustments to make sure we’re not being overly optimistic in our projections — or overly conservative, for that matter!
The Observatory looks at rolling periods over many decades, and is one of the most important planning tools in our arsenal. But only one period truly matters, and that’s the period looking forward — the rest of your life. For us, risk isn’t a measure of how much your portfolio fluctuates in value over the years. Risk is making a mistake that means you can’t live a lifestyle as you otherwise could have achieved. The greatest risk any of us face is this sort of real-life “Observatory failure.”
At Telarray, our job is to help you plan and invest with that risk in mind. We use the Observatory process to make sure your financial plan stands up to various historical returns and sequences of returns. We build diversified portfolios for the long haul. We make sure our vendors and fund providers are strong, competent, and likely to endure. We’ve built a world-class team from the ground up to execute with you on these plans and investments across all stages of life. We can’t eliminate all risk, but we can constantly evaluate and adjust to make the best plans possible for your unique situation.
A financial plan can often overcome a bad market period or a bad stretch of career luck, but even the best financial plan can be permanently impaired by controllable factors like chronic overspending or selling into a panicked market. You will experience setbacks and windfalls over a lifetime, but you can always adjust the plan as long as the pieces remain in place and the train stays on the tracks. The risks that can be controlled deserve much more attention than those which can’t.
Over the course of a lifetime, unexpected developments are expected, we just don’t know what form they will take. The best defense against risk is to have a good plan and continuously monitor and update it as life progresses.
That’s hard to do alone, which is why Telarray is here. In the years and decades to come, we’ll continue to be here, and we look forward to helping forge your individualized path to a secure financial future.