How Exactly Do You Stress-Test Your Financial Plan?
If you’ve been investing for some time, you most likely have a plan in place. Of course, these plans will vary depending on your specific goals, age and risk tolerance. But the essential consideration is that some sort of attainable goal, as well as a plan on how to reach that goal, is common to most investors.
Along with that, however, comes a fatal flaw that is seen far too often: These plans are made in a vacuum. You may think, if I continue earning my current salary, putting 10% in savings, and investing another 25%, then everything will turn out fine. Unfortunately, nothing happens in a vacuum — least of all in the world of investing.
The fact is that the circumstances in which you made your plan, economies experience recessions, and industries crash.
