What's The Plan For This Week?

Should be the same as last week, for most of us. If your plan changed because the markets had a hiccup over the last few days, I don't think that you had a very good plan to begin with.

One of the luxuries of being a financial planner is that I am focused on long investment horizons, usually over 10-50 years. When you expand your timeline on those levels, and measure success over the span of decades instead of days, the exciting daily and even weekly movements of US and overseas stock and bond markets just don't seem very important.

Not to say that they are meaningless. During weeks like the one we just lived through, like all investors, I find myself checking my investment accounts more often, rationalizing why this index or that stock is up or down, and wondering what is going to happen the next day. This is a natural reaction to volatility, which makes just about everyone uncomfortable.

I try to channel this discomfort, and use it as an opportunity to review things - check into client's accounts in particular - and make sure that we're doing the right thing based on their financial goals and their specific risk tolerance. If I did my job up front, we inevitably are.

It's so important to focus on the process during these times. There is always a temptation to let short-term outcomes shift your focus away from your long-term goals, but this nearly always a mistake. Because I take the time to put an investment plan together for my clients, when clients call to make sure that everything is alright, like they started to do this week, we go back to the plan that we put together and see if anything has changed from when we started to now. The vast majority of the time it hasn't, and so if we were comfortable enough to own a specific fund or asset class when we started, recent price changes shouldn't affect that.

With an investment plan you have a much easier time tuning out the inevitable noise and distraction inherent in the investment decision making process.

If you don't have a plan, and are worried about what your investments or the stock market did this week, instead of reacting emotionally I strongly suggest channeling that energy into producing something helpful. A financial plan is fantastic, but even a basic investment plan, or even just a simple process-based system of reviewing your accounts and making investment decisions can add a lot of value and perspective.

We can't control what happens with our investments, but we can control our actions. I've found that it's best to do this ahead of time - set rules and guidelines in advance, to be followed under pressure. Because your decisions can be easily influenced by your emotions and particularly fear, even a very simple flowchart can provide a ton of value. Create a process and a system and adhere to it over time.

This is what the financial planning process is all about. It's systematic. Unemotional. Patient. Sometimes extremely boring. But it works.

Let me know if you need some help. It's what I do.