If equities double over the next five years (not a prediction) and whatever portion you allocate to equities captures most of that move then your biggest concern probably becomes whether you are saving adequately. If equities go sideways for the next five years then chances are savings rate is again a primary issue.
The threat to your financial plan would be equities cutting in half over the next five years (also not a prediction) and somehow not coming back or cutting in half, scaring you out at the low and you’re watching from the sideline as they come back as has reportedly happened to many people after the financial crisis.
People in my life tell me I am a positive person and I also believe that to be the case so it is a little odd to say that you should come at financial planning from a glass half empty view point but this actually increases the chances for a positive outcome. By preparing for the challenging outcome (selling the house for less than expected or retiring with a smaller nest egg than expected or getting less than expected from Social Security) you will be better equipped to meet that challenge and ultimately overcome it….if that challenge ever even presents itself. All the better if it doesn’t.
This article was written by AdvisorShares ETF Strategist Roger Nusbaum.