Having a Portfolio vs Having a Plan

​When it comes to your money, there is a big difference between having an investment portfolio, versus having an investment plan.
 
A portfolio involves buying securities, and other types of investments. Often times, it is a bunch of these investments randomly thrown together to make up your overall allocation.
 
A plan involves creating a decision-making structure to help guide your actions. This allows you to follow a certain process when there are different changes in the market. An investment plan is the blueprint for helping an investor reach their goals given a certain risk tolerance.

The recent market correction has provided a great example of how getting rich overnight is not easy and it is not normal. Speculative investments have been taken to the woodshed recently.
(Think of the Robinhood day traders you heard about in the last couple years who made a fortune holding concentrated growth / tech stocks).
 
Much like hitting the lottery, holding these concentrated positions can make you wealthy, but it can certainly make you poor very quickly.
 
Most people can and should build wealth slowly. Read It’s Ok to Build Wealth Slowly
https://awealthofcommonsense.com/2021/01/its-ok-to-build-wealth-slowly/ 
​from last January addressing the FOMO (Fear of Missing Out) in all these (Get Rich Quick schemes) during the pandemic.
 
It’s times like these where it pays to construct an asset- allocation mix that is balanced to do well over time, while also being protected against unacceptable losses.


PERSPECTIVE

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Of course it may seem like the world is falling (as it does in any bear market), but it is important to put things in perspective.
 
Despite a global pandemic, highest inflation rate in 40 years, and 2 bear markets…. The S&P 500 is still up 19% since the start of 2020. 
 
We’ve had all of this going on, yet the market is still up almost 20 percent over the last two and a half years. People don’t view it this way, but it is sometimes smart to temper expectations.
 
It’s even more important to ask yourself if your goals and circumstances have changed enough to force a change to your portfolio?
 
A change in expectations doesn’t always require a change in strategy. You have to figure out whether you’re looking at the long term process or short term outcomes.
 
 
A baseball hitter doesn’t suddenly make drastic swing changes in the middle of the season after a bad week or a couple bad games.
 
This would be irrational. It is a 162 game season.
 
Instead, it is best to figure out what stance/ swing puts you in the best position to excel and succeed over the long term.
 
The same goes with investing.
 
Give yourself the best chance to succeed in your long term investment plan and meeting your goals REGARDLESS of the economic environment.
 
Let your plan be your blueprint for what you’re trying to accomplish with your money.
 
Your goals and risk tolerance drive your investment allocation…. not a forecast or prediction on the economy.