- Stick to your plan, use time and discipline to your advantage, and have confidants with whom you can discuss your goals.
- Be sure to have short-term, intermediate-term and long-term goals set up—in separate portfolios if necessary.
- Don’t check your investments more than once per quarter, and take frequent breaks from the news media.
Amazon founder Jeff Bezos was once asked, “What do you think is going to change in the future?” His response was that change wasn’t what to focus on. Instead, he said, “Ask yourself, ‘What’s likely to stay the same?’”
The same goes for your investment portfolio: Don’t focus on what’s changing; focus on what’s likely to stay the same. Thanks to smartphones and other technology, it’s easy to get real-time updates about what’s changing in your portfolio. It can get overwhelming. Instead, focus on these three principles for a sound, long-term wealth-building approach:
- Have a plan.
- Make sure you’re using time and discipline in your approach.
- Find a trusted advisor, friend or colleague whom you can consult when you’re thinking of making a change.
Let’s start with a plan. Your plan should be goal-based. You can have short-term, intermediate-term and long-term goals that are then set up in different portfolios.
Next, let’s look at time and discipline. Time refers to the duration of your investment horizon, and discipline refers to the type of investment portfolio you want. Let’s say you have a value-based stock portfolio and your time frame is five years. Suppose it’s 1998 and you hear Federal Reserve Chairman Alan Greenspan talking about “irrational exuberance” and that value-based investing is dead because traditional investing championed by the Warren Buffetts of the world is considered out of favor. So you move all of your money to dot-com and tech stocks, and then what happens? Your portfolio plunges by 60 percent to 95 percent in the early years after 2000, but value stocks hold up nicely.
You just violated the principles of time and discipline.
If you sense you’re about to stray from the principles of time and discipline or your overall plan, then talk to a trusted advisor, colleague or friend ASAP. You want someone who can walk you through your thought process to make sure you’re not making a bad decision.
How often should you check your portfolio? Once per quarter is fine—you don’t need to monitor it on a daily basis. With a quarterly review, you can make sure your investment managers are staying on track with your objectives and that your three- to five-year returns are in line with the risk and reward you expected over that time frame.
It’s so important to turn off the news media, stop looking at the stock quotes all day long, stay with your plan, and go forward with time and discipline. Again, if you feel like you’re going to violate any of the key principles we discussed here, talk to a trusted financial advisor, friend or colleague before you make a decision you’re likely to regret.
Until next time, enjoy. Gary
Learn more about TransformingWealth™ , our proprietary approach, designed to get your arms around the big picture so you can make informed financial decisions. Ask Gary about Coyle’s TransformingWealth Preview Meeting, and schedule a complimentary consultation and start living the Good Life Managed Well™.
Gary Klaben is in our Glenview, IL office and serves our clients who are now located all over the country. He has over 30 years of experience and is the author of Changing the Conversation, The Wealth Sanctuary and co-author of The Business Battlefield. Whether advising his clients, mentoring his team, or coaching entrepreneurs, he is always simplifying complexity and motivating others to take the next action that’s right for them.
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