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Final Thoughts on Your Investment Plan

To conclude our discussion on investment plans, I would like to offer a few final suggestions. First, develop a good investment plan and stick to it. This plan is your road map to attaining your financial goals. Think it through, write it well, and follow it closely. An example of a good investment plan can be found in Learning Tool 5A: Investment Plan Example in the Learning Tools directory of this website. Feel free to copy this plan and personalize it based on your views of risk, return, constraints, investment policy, and portfolio monitoring and rebalancing. Instructions on filling this plan out are found in Learning Tool 5B: Investment Plan Example Instructions.

Second, compare the performance of your assets to your chosen benchmarks on a monthly, quarterly, and annual basis. No one will watch your portfolio like you will.

Third, beware of following the investment crowd. It is unlikely that last year’s best performing asset classes will be this year’s best performing asset classes. In my experience with investing, I have found that winners rotate and that it is unlikely that today’s best performing stocks and funds will be next year’s best performing stocks and funds. Avoid chasing last year’s winners.

Finally, remember that there are tax consequences for selling—try to minimize those tax consequences as much as possible. Beware of churning, or buying and selling too often. Rebalance your portfolio annually—perhaps even less often.


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