OUR PROCESS - Averages and Outliers
Based on some quick online research, I found the average wind speed in Miami, FL, to be somewhere between 5-10 miles per hour.
Until, of course, a hurricane is bearing down on Florida's southeast coast.
Forget average winds during a hurricane.
A 5-10 MPH average breeze pales in comparison to 74+ MPH winds in a category 1 hurricane. And hurricanes can and do get a lot stronger than category 1.
As a result, homes and buildings in Miami are built, not based on the average wind speed, but on the less likely, but very possible extreme conditions they might experience. I'm sure the possibility of hurricanes also influences their city planning and infrastructure, among other things, as well.
Similarly, your portfolio’s average performance over the past 3,5,10, years is not very helpful when it looks and feels like we're in the midst of a financial hurricane today.
As much as we all seek certainty, especially in times of increased uncertainty, it can never be guaranteed. Sure, we work hard to reduce uncertainty by reducing costs, being more tax-efficient, taking only the level of investment risk necessary to support your plan, and more...
But no matter how much conviction you or I have in your plan, we just don't know what will happen in the future - Despite how thorough we've been.
But I'd like to remind you that we build your financial plan on something a little more involved than simple long-term averages.
Rather than basing your financial (and life) plan on the equivalent of Miami's average wind speed of 5-10 miles per hour, we instead regularly stress test your plan to see how it would hold up again "hurricane" conditions, financially speaking.
We can and do stress-test your plan to see how it would have performed based on history.
And we also stress-test your plan to see how sustainable it would have been in markets that are both better AND worse than we've ever experienced as well as in all types of markets in between.
Your plan is subjected to rigorous poking, prodding, and analysis, along with lots and lots of math, to reduce - not eliminate - as much uncertainty as we can.
Ultimately no one knows what will happen tomorrow let alone 10, 20, or 30 years from now? But take heart in the fact that we have a structured process to both build and regularly update and stress-test your financial life plan to make sure that it holds up to both a gentle breeze as well as hurricane-force winds. Today - and for the rest of your life.
Because there is no such thing as a crystal ball that can see into the future, your financial plan is never going to be "right." But through regular progress checks and updates, we can do the important work of making it "less wrong". And here’s the cool part - being “less wrong” is all you need to achieve to live your best life in comfort and confidence.