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A “fool proof” never changing investment plan

November 8, 2018

There is no such thing.  Investment and financial plans are ever changing based on the economy, political climate, global interactions, tax changes, interest rates, dividend payout rates, stock prices, new products, innovation, technology including the Cloud, Blockchain, artificial intelligence and robotics, medical advances or the lack thereof, risk tolerances, your health, family relationships and responsibilities, individual circumstances and myriad other reasons.

Investments need to be looked at and monitored regularly.  However, once you have a financial plan and asset allocation program in place I do not believe that it should change precipitously.  Serious consideration should go into any changes.  And the changes should be only when your core issues are at risk or have changed.  Frequent changes will make you a trader which is not what long term planning for financial security is about.  Jumping to grab the next hot item or responding to sudden changes is not conducive to long term financial health.  The careful planning and thought given to your original planning should not be abrogated when there is a momentary shift in the wind.  Think, plan, consider and stay the course is a sensible to handle long term planning.

Quite some years ago I prepared a “gag” book titled “Investing and Financial Planning Rule Book” with a nice cover and a hundred pages.  Inside on the first page I wrote:  Rule #1 for financial planning and investing:  If you don’t understand the advice, assume the person telling it to you is wrong.  Don’t assume that because it is complicated and a specialty you do not have, that the advisor is correct.  Never be embarrassed to say you don’t understand.  If you don’t understand something about your finances, most likely it is the wrong thing for you to do.  Rule #2: See rule #1.  Rule #3: See rules #1 and #2.”  The next page had written in it: “There are no other rules.”  The rest of the pages were blank.  This is still great advice.  I don’t consider this a “gag” book – it could be the most serious investing and financial planning book you could ever read.

Things change and you need to be aware of the changes and react properly.  But sometimes it is better to not react than to over react.  Understand what you are doing as measured against your original plans and your current circumstances.

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