Save, invest, plan. Three simple principles for a life of wealth and happiness.

As 2020 winds down, it will go down as one of the most tumultuous years for Wall Street. At the beginning of the year, global markets were reflecting robust economies, interest rates were ticking upward, and renewed inflation was the topic of discussion within the financial media.

As the year unfolded, these same markets tried to navigate the unknowns of a global pandemic and a highly contentious national election.

This past year produced one of the fastest bear markets on record (defined by a drop in value of 20 percent or more), with the S&P 500 Index finally bottoming out at 2,191 on March 22, 35 percent below its high point attained barely one month earlier. This bear market was then followed by one of the fastest bull markets in history, with the index trading 20 percent higher a mere 13 days later.

This volatility reminded us yet again that capital markets can be highly irrational in the short run, driven not by the earnings of underlying companies, but by the emotions of investors who try to make sense of the unfolding economic and political events around the globe.

There is a silver lining to this volatility. This same daily activity by stock traders makes the market “efficient” in the long run, which means that there is no value in trying to maneuver through this volatility to capture more than the market’s return over the next decade and beyond.

This market efficiency allows us to diversify our portfolios between stocks and bonds utilizing low-cost index funds, assured that we will capture our “fair share” of long-term market returns. For example, if you do choose to invest a portion of your portfolio in large-cap domestic stocks over the coming decades, an S&P 500 index fund means you will capture that sector’s return, less any fees attached to the fund.

A portfolio of low-cost index funds allows you to maximize your returns among global markets. A far greater benefit is that it allows you to turn your attention away from this never-ending volatility in the markets and focus on financial planning issues that matter most of all.

To start, your financial plan should provide clarity on your saving and spending goals. With taxes likely to be the biggest drain on your portfolio over a lifetime of investing, your financial plan also should include a tax-efficient strategy for building a portfolio (saving), as well as the withdrawal phase throughout retirement (spending). Is it time to update your wills and estate plans? Is your insurance coverage adequate? Is it time to refinance, or pay off that mortgage? Do you have a game plan in place for what will likely be the biggest financial risk of all — unexpected healthcare costs later in life?

These are just a few components of your financial well-being you can address as we embrace the new year. Take this opportunity to turn away from the daily commotion of Wall Street and focus on what matters most of all. Save, invest, and plan for a life of wealth and happiness.