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Rock House Financial’s Year-End Financial Planning Checklist

What a year 2020 has been. From an investing standpoint, it was quite the rollercoaster. Markets were at an all-time high heading into January, but then the Coronavirus pandemic hit and sent stocks plummeting to all-time lows by March. It was enough to shake the confidence of even the strongest investors.

As we come to the end of 2020, it’s important to take what we learned this year and use it to better prepare us for the future. At Rock House Financial, end-of-year is always an important time as we help clients review their financial plans and adjust accordingly based on any changes they experienced that may have changed their financial goals. Because 2020 affected so many people, we wanted to take a step further and share our year-end financial planning checklist to help investors build (or rebuild) confidence as we head into 2021.

From a financial advisor in Utah, here are 4 steps you can take now to help build confidence as an investor and start 2021 on the right foot:

1. Accept That You Can’t Time the Market

Ever heard of hindsight bias? It’s the idea that you can look back on past events and say, “I should’ve seen that coming all along. The signs were right there in front of me.”

We’ve all had thoughts like this (me included). But the problem with hindsight bias is that it leads us to believe we can predict the future, which is especially dangerous when it comes to trying to time the market.

The truth is, no one can predict the future and no one can forecast the market – not even the top investors and economists. The stock market doesn’t follow a magic formula. There is no secret code to crack.

When you try to time the market, it can do more harm than good, because you can:

  • Lose profits to trading fees and commissions
  • Add unnecessary risk to your portfolio
  • Have to be right twice (once when it’s time to buy a stock at its lowest point, and again when it’s time to sell at its highest point – a strategy that is next to impossible)

Thankfully, you don’t have to time the market to be a successful investor. Studies show that if you dollar-cost average and use a buy-and-hold strategy, your portfolio will typically outperform those who actively trade. The market rewards those who are patient. 


Are your finances ready for 2021? Contact Rock House Financial and find out if you’re on the right track.


2. Review Your Risk Tolerance

Any investment carries risk. Even “safe” investments, such as federally insured CDs, can lose value to inflation. The key is to mitigate these risks through proper diversification.

Take the fall of Enron, for example. Many of the company’s employees had all their retirement accounts invested in company stock. When Enron went belly up in 2001, these employees were left with no paycheck and no retirement savings. They put all their eggs in one basket, and they lost it all.

This is a sad example of what can happen when you don’t diversify.

We can all learn from these mistakes. Even if a stock feels like a safe bet, it may not be 20 years from now. Talk with a fiduciary financial advisor who really understands market performance. Before you add an investment to your portfolio, think about how it will impact your financial stability if it were to lose value. And think of what this would do to your nerves. If market volatility makes you lose sleep at night, taking high risk in your portfolio likely isn’t worth it.

3. Build Your Portfolio with Your Needs in Mind

A balanced portfolio has 3 non-negotiable qualities:

  1. It’s well-diversified.
  2. It doesn’t have much turnover.
  3. It has relatively low costs.

That’s where the similarities stop. The truth is, your investment portfolio should be as unique as your financial situation.

For example, if you’re more risk-averse, you may need more bonds in your portfolio than the average investor. If you’re about to close on a house, you may need to move money out of your riskier investments into cash so they don’t lose value.

Your personal tax situation may also play a role in how you should structure your portfolio.

There are many different ways to structure a portfolio based on your needs. Having a financial advisor assess your situation and put together a plan can help you reach your goals in a way that works for you.

For more specific concerns, check out our new financial planning guides:

Financial Planning for Business Owners

Financial Planning for Women

4. Put Your Investing on Auto-Pilot

Sometimes “out of sight, out of mind” is the best approach to investing. When you’re constantly checking your portfolio value and tuning into the latest financial news, it can cause you to invest on emotion, which often leads to regret.

Here are 2 ways to put your investing on auto-pilot:

  1. Dollar-cost average. With dollar-cost averaging, you invest the same amount of money each month regardless of how the market is doing. When stocks are high, you end up with fewer shares. When stocks are cheap, you end up buying more shares. (Read our recent blog post: Why Investing at Low Prices Can Be a Good Thing.)
  2. Tune out the noise. When there’s a lot going on in the world, the media can get you in a frenzy about your investments. Turn off the TV, delete the news app on your phone, and stop checking your portfolio balance every day. Instead, focus on your long-term strategy and trust the process. If you’re feeling uncomfortable about something, check in with your financial advisor and remember your long-term goals.

How Rock House Financial Can Help

Working with a fiduciary financial advisor can help you overcome the fears and doubts you may have about investing. At Rock House Financial, our financial advisors work with many high net worth professionals in Utah who are looking to secure their financial futures and build a lasting legacy for their families. If you need help putting together a financial roadmap that helps you reach your goals in 2021 and beyond, we’re happy to help.

There’s no better time than a new year to get the conversation started. Schedule a no-obligation meeting that works for you and take the first step into a more confident 2021.

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