It’s a Plan – Not a “Best Pick” – that Leads to Long-Term Success

By Aradhana Kejriwal   |   January 8, 2015

The holiday party season just ended, full of delicious food, wine, and time with friends and family … as well as conversations about the best investment ideas, the highest-returning stocks and the portfolio that returned the most. I’m sure I’m not alone in running into these conversations. The other person with the win – your brother-in-law, an old school friend, or even your neighbor – makes investing sound so easy. “Picking the best mutual fund, easy!” “Beating the S&P 500, no problem!”

If these conversations leave you with a sick feeling in your stomach that you might be losing in your portfolio and missing out on the next big win, it could be more than holiday bloat weighing you down.

In an effort to help ease that sick feeling and focus on what matters most, here are a few simple ideas that you could consider and repeat as necessary:

1)  Clearly identify your financial goals:  Knowing what your goals are can help you reflect on any portfolio changes you might be considering. Should you buy the next hot investment or keep your hard-earned dollars in a well thought-out portfolio? You are the driver of your life and your portfolio; hence, your life goals, growth and income needs should drive your investments.

2)  Make a plan to reach those goals:  Your long-term needs are what really matters and focusing on a disciplined and systematic process to achieve those goals is what drives success, not investing in today’s winners or paying attention to random short-term market noise. Having a plan and a process to get to your goals can help you hone in on your appropriate risk level – the risk you should take versus the one you are about to take chasing a “sure-fire” investment idea.

3)  Hold investments that fit your goals and plan:  Investment decisions of buying and selling from your portfolio are best made in context of your overall financial goals. When you make decisions based on facts about what you are trying to achieve, you should be better able to keep your emotions in check and stick to your convictions even when others are engaged in panicked selling or in greedy buying. There is no guarantee that any investment will triple or will not go to zero. However, a portfolio well designed with long-term goals in mind and a process developed to get you there can help you reach your goals. Being caught in the trap of looking for the best idea or chasing the winners can lead you to costly mistakes with your hard-earned money.

Behavior Gap by Carl Richards

Source: Carl Richards, Behavior Gap

Remember, it’s your PLAN — NOT your best pick — that will lead to long-term investment success. Your investment behavior matters more than luck of racking up a few conversation-worthy wins.  So as we embark upon a New Year, resolve to make your investment behavior count!

Aradhana Kejriwal

About the Author

Aradhana Kejriwal, CFA®, is JOYN's Chief Investment Officer and co-chairs the Investment Committee, which formulates and implements the firm's investment philosophy, strategies, processes and procedures. With 19 years of investment experience, she's a popular industry writer and speaker.

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