Building a lasting legacy requires a perspective that extends beyond short-term market fluctuations. It’s about the enduring impact you have on your family, your community, and the causes you care about. Market volatility, while unsettling, represents short-term noise in the context of this long-term narrative. The key to staying the course lies in defining a clear, compelling vision for your legacy and using it as a North Star to guide your financial decisions.
This is the first of a two-part series focused on helping you build your legacy amid uncertainty. First, we’ll walk you through a vision-setting exercise. Part two will offer practical strategies to maintain the course.
Setting Your Legacy Vision
Creating a long-term vision involves thoughtful consideration and clear articulation. Here are the steps to define a vision that will anchor your financial strategy:
Picture Your Ideal Future: Begin by visualizing your ideal legacy. What do you want to achieve? What impact do you want to have? Be specific. Do you envision:
- Providing for future generations with education and other opportunities?
- Supporting philanthropic causes that are important to you?
- Ensuring the continuity of a family business?
- Other unique aspirations?
Identify Your Core Values: Your values are the fundamental beliefs that guide your life. They provide the ethical framework for your decisions, including your financial ones. Consider what truly matters to you. Does it include:
- Environmental stewardship
- Other deeply held principles?
Define Measurable Objectives: Once you have a vision and a set of values, translate them into specific, measurable, achievable, relevant, and time-bound (SMART) financial objectives. Examples include:
- Establish a charitable foundation with an initial endowment of $X million by December 31, 20XX, to fund scholarships in STEM fields annually
- Create an irrevocable family trust by June 30, 20XX, with an initial contribution of $X million in diversified assets, designed to provide annual distributions for the education and well-being of grandchildren.
Document Your Plan: The final step is to create a written financial plan that outlines your vision, values, and objectives. This plan serves as your roadmap, providing a clear path and benchmarks for tracking your progress.
Our Guidance: Take the time to reflect deeply on these questions. The more compelling your vision, the more resilient you will be in the face of market fluctuations. Work with your financial advisor to document your plan, ensuring it reflects your unique aspirations and values.
Tuning Out the Noise
Market volatility can be a significant source of anxiety, tempting investors to make impulsive decisions that can derail your long-term strategy. By staying anchored to your clearly defined legacy vision, you can better filter out short-term distractions. Here are some strategies for staying focused on your long-term vision and avoiding the pitfalls of short-term market noise:
- Focus on Fundamentals: Long-term value is driven by underlying economic and business fundamentals, such as company earnings, innovation, and long-term growth trends. These factors are far more important than daily market swings.
- Regularly Review, Infrequently React: Schedule regular reviews of your portfolio with your financial advisor but avoid making frequent changes based on short-term market movements. A well-constructed plan is designed to weather these fluctuations.
- Trust Your Long-Term Strategy: Your financial plan is built on a foundation of careful analysis, diversification, and a long-term perspective. Trust the process and avoid second-guessing your strategy during periods of volatility.
- Perspective is Key: Market cycles are a normal part of investing. History shows that markets have recovered from downturns and gone on to reach new highs. Maintaining a long-term perspective can help you stay grounded during periods of uncertainty.
Our Guidance: Develop a disciplined approach to managing market information. Work with your advisor to understand the historical context of market volatility and how your portfolio is positioned to navigate different scenarios. Remember, your long-term vision is your anchor in the storm.
Values-Based Investing
Investors often align their portfolios with their financial goals and their personal values. This approach, known as values-based investing, can provide both clarity and confidence, fostering a deeper connection to your investments and reinforcing your commitment to your long-term legacy.
Values-based investing is a highly personal endeavor. It begins with a process of self-reflection and open communication. Here's how to integrate your values into your investment strategy:
Self-Reflection: Take the time to consider your ethical priorities. What issues do you care most about? What kind of impact do you want to have on the world? Consider a broad range of topics, including:
- Environmental sustainability
- Social justice and human rights
- Corporate governance and ethical business practices
Identify Key Themes: Translate your broad values into specific investment criteria. For example, if you value environmental sustainability, you might focus on investments in:
- Renewable energy companies
- Businesses with strong environmental records
- Funds that exclude fossil fuels
Open Dialogue with Your Advisor: Have an open and honest conversation with your financial advisor about your values. They can help you understand how to incorporate these values into your investment strategy and identify suitable investment options.
Research and Due Diligence: Before making any investment, research the company's practices and policies to ensure they align with your values. Look for information on:
- Environmental, social, and governance (ESG) ratings
- Company reports and disclosures
- Third-party assessments and certifications
Maintaining a Neutral Stance
It’s important to recognize that values are deeply personal and can vary significantly. When discussing values-based investing, our role is to facilitate the client’s self-discovery and provide options that align with their individual principles.
This means presenting information neutrally, without judgment on specific industries or ethical viewpoints. For example, while one client may have strong convictions against investing in certain sectors, another may have different priorities. Our guidance focuses on the process of aligning investments with individually held values, rather than promoting specific ethical stances.
By taking the time to define your vision and core principles, you create an anchor that keeps you steady through market fluctuations. Contact us with any questions and stay tuned for Part 2 of our series, where we offer strategies for staying the course.
