Updated: May 14
Mike Tyson once said:
“Everyone has a plan until they get punched in the face”
From an investment perspective, we just went through several rounds of getting punched in the face - and it may not be over yet.
Most people earn less on their investments, both with and without, professional investment advice versus buying and holding and index fund.
Why do most people buy and sell investments at the wrong time? With over two decades of investment experience, I’ve gained some insight into this issue.
We. Are. Human.
Humans have emotions that often interfere with our own self interest - especially if they are not considered prior to getting punched in the face.
A Financial Plan while better than nothing may not be the best tool for when the unexpected inevitably happens. The average financial plan is a document mapping your saving and expenses and insurance, but these plans miss on the single most important determinant of your success.
What is that critical, but neglected variable? A plan for your investment actions.
Achieving the targeted rate of return in most financial plans is a critical variable, and yet having a well contemplated strategy and process for achieving it is rarely if ever done by most advisors.
An investment focused plan should be ready for when the markets inevitably rise and fall, and specifically tailored to your specific tolerance for risk, tax situation and need for liquidity. Unexpected things constantly occur in financial markets and investors should plan for this.
A specially tailored investment plan makes staying focused on your goals easier and provides a decision-making roadmap that is designed to limit the catastrophic influence of fear and greed during critical periods.
If you want to increase your odds of investment success - have an investment plan.