Infographics

Financial Wellness: How to Be Resilient During a Crisis

Published

5 years ago

June 3, 2020

Jenna Ross

This infographic is available as a poster.

Financial wellness during crisis

This infographic is available as a poster.

Financial Wellness: How to Be Resilient During a Crisis

Due to the COVID-19 pandemic, 90% of Americans feel anxious about money. These stress levels are the same across all income groups.

Unfortunately, financially-stressed people are more likely to face physical and mental health challenges. For example, people with high debt stress during the 2008 financial crisis had higher levels of back tension, severe depression, and anxiety.

In today’s infographic from New York Life Investments, we take a look at the current state of financial health, and highlight ways people can improve their financial wellness during a crisis.

A Current Snapshot

Financial health is the degree to which people are able to be resilient and take advantage of opportunities over time. It rests on eight indicators:

Spend: Spend less than income and pay bills on time
Save: Have sufficient liquid savings and long-term savings
Borrow: Have manageable debt and a prime credit score
Plan: Have appropriate insurance and plan ahead financially

Based on these factors, individuals fall along a spectrum of financial health. In the U.S., only about 28% of people were considered to be financially healthy in a 2019 study.

Clearly, many Americans were already facing challenging circumstances prior to the pandemic. Here are a couple of the top issues.

More Complexity

Finances have become more complicated over time.

For many years, workers could rely on defined benefit pension plans that paid a set amount in retirement. In recent decades, pensions have primarily shifted to defined contribution plans. These require the employee to make investment decisions and build their own nest egg.

Unfortunately, financial education has not kept pace with the rising need for knowledge. Fewer than half of U.S. states require high school students to take a course in personal finance.

“Money Talk” Taboo

To build financial literacy, individuals would benefit from talking more openly about money. However, 44% of Americans surveyed would rather talk about religion, death, or politics than discuss personal finance with a loved one.

Fears of embarrassment and conflict are major emotional roadblocks that hamper financial progress. What can individuals do to improve their financial wellness, especially during a crisis?

Building Resiliency

People can follow a step-by-step strategy to optimize their financial situation.

Assess their current situation.
Uncertainty can be a major source of anxiety. To identify the source of stress—and determine if it’s warranted—investors can take stock of their income, expenses, savings, and debts.

Financial self-awareness is positively associated with greater financial satisfaction, and stronger spending and investing decisions.
Prepare for the worst-case scenario.
What can individuals do if they lose their job or see a prolonged drop in retirement savings?

Investors can consider various options, such as taking on freelance work, cutting unnecessary expenses, or increasing retirement plan contributions. Then, they can “stress test” their financial plan to account for these scenarios and begin preparing as best they can.
Break goals into small chunks.
Specific, achievable, and measurable goals are easier to manage. For example, rather than having a goal to pay down $51,000 in debt, an individual could aim to make monthly payments of $850 over five years.

By setting smaller goals, investors can take action to make progress. Research has shown that achieving quick wins makes people more likely to achieve their financial goals.
Improve financial knowledge and openness.
Investors can educate themselves as much as possible—people with high investment knowledge are proven to be more prepared and less anxious.

Has planned for retirement Feels anxious when thinking about personal finances Has emergency savings

Low Investment Knowledge 62% 48% 78%

High Investment Knowledge 73% 21% 90%

People can also take steps to break financial taboos with loved ones, by starting with simple conversations about experience and building to more concrete discussions about family finances. The ability to talk about money is one of the most important skills for building financial literacy.
Create long-term, purposeful goals.
Setting the right goals helps investors define their own parameters for success, which in turn keeps them focused and motivated. It’s also important to monitor goal progress regularly, to allow for portfolio or contribution adjustments as needed.

	Has planned for retirement	Feels anxious when thinking about personal finances	Has emergency savings
Low Investment Knowledge	62%	48%	78%
High Investment Knowledge	73%	21%	90%

Taking Charge

Financial crises can strike at any point in time, whether it’s due to personal circumstances or an economic downturn.

To improve their situation, people can focus on the controllable elements of financial health: spending, saving, borrowing, and planning. This allows investors to emerge with a stronger, more resilient plan than they had before the crisis.

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Infographics

A New Framework for Personalized Financial Portfolio Alignment

The MSCI Similarity Score compares a client’s financial portfolio to a model portfolio based on risk exposures, allowing for personalization.

Published

1 month ago

June 6, 2025

Jenna Ross

A waterfall chart showing the MSCI Similarity Score calculation from 100% perfect financial portfolio alignment being reduced by different risk exposures.

A New Framework for Personalized Financial Portfolio Alignment

There’s a tension between clients’ need for personalization and the one-size-fits-all approach of model portfolios. Traditionally, wealth management firms check financial portfolio alignment based on exact holdings. However, some level of mismatch with a model portfolio is inevitable due to client preferences and circumstances.

How can advisors meet the personalization needs of their clients at scale?

This graphic, created in partnership with MSCI Wealth, highlights a new framework called the MSCI Similarity Score that allows for customization.

Introducing the MSCI Similarity Score

With the MSCI Similarity Score, firms can assess financial portfolio alignment in a simple, single score. A score of 0 indicates no alignment, while a score of 100 indicates full alignment.

The score measures how similarly a client portfolio behaves compared to a firm’s model portfolio based on various factors. For equity, this includes things like the country and industry of a company, as well as the strategies used, such as targeting growth stocks. For instance, two U.S. technology growth stocks may behave similarly in response to market movements.

This approach allows for more flexibility to meet clients’ unique goals and risk appetites. It’s a similar idea to someone counting calories, rather than restricting their diet to specific foods.

Seeing the Score in Action

How does the MSCI Similarity Score work in practice? Consider a hypothetical U.S. client that an advisor is onboarding.

The advisor has assigned the client to a high-quality global equity model portfolio, and is checking alignment.

Name	Model Allocation	Client Allocation	Difference
Core Total US Stock Market ETF	--	30%	-30%
MSCI USA Quality Factor ETF	--	10%	-10%
Total Stock Market ETF	40%	--	40%
Core MSCI EAFE ETF	--	8%	-8%
MSCI Emerging Markets ETF	--	4%	-4%
MSCI INTL Quality Factor ETF	--	3%	-3%
MSCI ACWI ex-US ETF	20%	--	20%
7-10 Year Treasury Bond ETF	--	15%	-15%
Corporate Bond ETF	--	8%	-8%
1-3 Year Treasury Bond ETF	--	3%	-3%
Core US Aggregate Bond ETF	30%	--	30%
Private Equity Fund	--	10%	-10%
Corporate Lending Fund	5%	10%	-5%
Gold ETF	5%	--	5%

Specific funds and ETFs are for illustration only and do not constitute recommendations.

The client’s holdings are quite different from those of the model portfolio.

However, using the MSCI Similarity Score, the advisor compares the two portfolios on the factors driving their performance.

MSCI Similarity Score Breakdown

Starting from a perfect score of 100, each difference in risk exposure between the client’s portfolio and the model portfolio reduces the score.

Risk Factor	Score
Starting Point: Perfect Alignment	100.0%
Global Equity	-7.5%
Commodities	-4.9%
US Private Equity	-2.3%
U.S. Equity	-1.9%
USD Rates Level	-0.4%
Final Similarity Score	83.0%

The biggest difference between the two portfolios is their exposure to global equity risk.

With a strong Similarity Score of 83.0%, the advisor can see that the drivers of risk for both portfolios are closely aligned despite holding different funds.

A Flexible Approach to Financial Portfolio Alignment

The MSCI Similarity Score helps wealth management firms assess alignment between a client portfolio and model portfolio based on their behavior, rather than exact holdings.

This approach has a number of benefits.

Personalization: Wealth managers can customize client solutions without sacrificing portfolio alignment.
Transparency: Clients can see how their financial portfolio aligns with the firm’s recommendation, building their confidence in their investments.
Scalability: Firms can quickly see the score across multiple portfolios, helping them manage thousands of clients efficiently.

As client needs evolve, the MSCI Similarity Score is a simple and innovative way to customize financial portfolio alignment.

Learn more about the MSCI Similarity Score.

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Infographics

The 20 Most Common Investment Mistakes, in One Chart

Here are the top investment mistakes to avoid, from emotionally driven investing to paying too much in fees.

Published

2 years ago

November 7, 2023

Dorothy Neufeld

The 20 Most Common Investment Mistakes

No one is immune to errors, including the best investors in the world.

Fortunately, investment mistakes can provide valuable lessons over time, providing investors an opportunity to gain insights on investing—and build more resilient portfolios.

This graphic shows the top 20 mistakes to watch out for, according to the CFA Institute.

20 Investment Mistakes to Avoid

From emotionally driven investment decisions to paying too much on fees, here are some mistakes that investors commonly make:

Top 20 Mistakes	Description
1. Expecting Too Much	Having reasonable return expectations helps investors keep a long-term view without reacting emotionally.
2. No Investment Goals	Often investors focus on short-term returns or the latest investment craze instead of their long-term investment goals.
3. Not Diversifying	Diversifying prevents a single stock from drastically impacting the value of your portfolio.
4. Focusing on the Short Term	It’s easy to focus on the short term, but this can make investors second-guess their original strategy and make careless decisions.
5. Buying High and Selling Low	Investor behavior during market swings often hinders overall performance.
6. Trading Too Much	One study shows that the most active traders underperformed the U.S. stock market by 6.5% on average annually. Source: The Journal of Finance
7. Paying Too Much in Fees	Fees can meaningfully impact your overall investment performance, especially over the long run.
8. Focusing Too Much on Taxes	While tax-loss harvesting can boost returns, making a decision solely based on its tax consequences may not always be merited.
9. Not Reviewing Investments Regularly	Review your portfolio quarterly or annually to make sure you’re staying on track or if your portfolio is in need of rebalancing.
10. Misunderstanding Risk	Too much risk can take you out of your comfort zone, but too little risk may result in lower returns that do not reach your financial goals. Recognize the right balance for your personal situation.
11. Not Knowing Your Performance	Often, investors don’t actually know the performance of their investments. Review your returns to track if you are meeting your investment goals factoring in fees and inflation.
12. Reacting to the Media	Negative news in the short-term can trigger fear, but remember to focus on the long run.
13. Forgetting About Inflation	Historically, inflation has averaged 4% annually. Value of $100 at 4% Annual Inflation After 1 Year: $96 After 20 Years: $44
14. Trying to Time the Market	Market timing is extremely hard. Staying in the market can generate much higher returns versus trying to time the market perfectly.
15. Not Doing Due Diligence	Check the credentials of your advisor through sites like BrokerCheck, which shows their employment history and complaints.
16. Working With the Wrong Advisor	Taking the time to find the right advisor is worth it. Vet your advisor carefully to ensure your goals are aligned.
17. Investing With Emotions	Although it can be challenging, remember to stay rational during market fluctuations.
18. Chasing Yield	High-yielding investments often carry the highest risk. Carefully assess your risk profile before investing in these types of assets.
19. Neglecting to Start	Consider two people investing $200 monthly assuming a 7% annual rate of return until the age of 65. If one person started at age 25, their end portfolio would be $520K, but if the other started at 35 it would total about $245K.
20. Not Controlling What You Can	While no one can predict the market, investors can control small contributions over time, which can have powerful outcomes.

For instance, not properly diversifying can expose you to higher risk. Holding one concentrated position can drastically impact the value of your portfolio when prices fluctuate.

In fact, one study shows that the optimal diversification for a large-cap portfolio is holding 15 stocks. In this way, it helps capture the highest possible return relative to risk. When it came to a small-cap portfolio, the number of stocks rose to 26 for optimal risk reduction.

It’s worth noting that one size does not fit all, and seeking financial advice can help you find the right balance based on your financial goals.

Another common mistake is trading too much. Since each trade can rake up fees, this can impact your overall portfolio performance. A separate study showed that the most active traders saw the worst returns, underperforming the U.S. stock market by 6.5% on average annually.

Finally, it’s important to carefully monitor your investments regularly as market conditions change, factoring in fees and inflation. This will let you know if your investments are on track, or if you need to adjust based on changing personal circumstances or other factors.

Controlling What You Can

To help avoid these mistakes, investors can remember to stay rational and focus on their long-term goals. Building a solid portfolio often involves assessing the following factors:

Financial goals
Current income
Spending habits
Market environment
Expected returns

With these factors in mind, investors can avoid focusing on short-term market swings, and control what they can. Making small investments over the long run can have powerful effects, with the potential to accumulate significant wealth simply by investing consistently over time.

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