Simplify Your Investment Success

Alina Myakota |

When it comes to improving your investment outcomes, there's a surprisingly simple yet incredibly effective step you can take: write down your investment plan. Our brains tend to deceive us when recalling past choices, especially in the emotionally charged world of finance. In prosperous times, it's easy to be driven by greed, while during downturns, fear can cloud our judgment. Crafting a written investment plan, even if it's just a single page, can be crucial for your short-term and long-term goals. Let's break it down.

Outsmart Your Brain

As an investor, you can be your own worst enemy. Sometimes investors just owning low-cost ETFs can end up significantly lagging the markets they are trying to track. This happens because at low points in the market, losses can become too painful and it's tempting to sell. Selling can mean missing out on future gains. Conversely, when markets are riding high, the allure of increased returns can lead to underestimating the associated risks. Our brains have a tendency to forget or rewrite history, including our original investment intentions. Writing down your goals and investment plans in advance acts as your steady compass through these market storms.

A Quick One-Page Investment Plan

The good news is that crafting an investment plan doesn't have to be a time-consuming ordeal. Think of it this way: the money you earn from investments over time can surpass your job income. So, investing deserves your attention. Set aside time, perhaps annually, to create and review your plan. Keeping it concise (a single page will do) ensures clarity. Here are some crucial questions to kickstart the process:

  1. Define Your Financial Goals: Whether it's early retirement, a second home, or a specific financial milestone, your goals should inspire you.
  2. Determine Your Savings Rate: Your savings rate is up to you. Generally, experts recommend around 10% to 15% of your income as a good savings rate to aim for. Align this rate with your goals and track your progress diligently.
  3. Maximize Tax Efficiency: Explore tax-efficient savings options. There are various different government incentives that you can utilize in achieving your financial goals. The best way to explore and account for them is to consult a reliable financial advisor who would be able to guide you in the right direction. 
  4. Plan for Market Events: Anticipate market turbulence. What's your response to a 10% stock drop? A 20% dip? Preparing for these scenarios can prevent impulsive reactions.
  5. Set Withdrawal Guidelines: Ensure your withdrawals align with your goals. For example, if you're saving for retirement, resist the urge to use your funds for non-essential expenses.

Putting It All Together 

The questions outlined above can serve as the framework for your plan. It's crucial to remember that perfection isn't the goal, as emphasized by Timothy Geithner, the former Treasury Secretary, who often stated, "Having a plan is better than having no plan at all." Our aim isn't flawless execution; rather, it's to capture a concise summary of your investment goals and your envisioned path to reach them.

Financial advisors can be a great tool in investment planning and ensuring your future goals are aligned with your current actions. At Blackbridge Financial, we are here to help you create a reliable and most efficient path to your future success, ensuring you have the right knowledge and skills. If you would like to schedule a meeting to discuss your goals and the best way to achieve them, following this link, and we will help you get started!