Which Is More Important: Portfolio Performance or Your Financial Plan?


As advisors, our process begins by asking about your financial goals. In most cases, the number one goal is a sustainable retirement in which you have an income that you do not outlive. From there, we want to construct a blueprint for your financial plan that will become our roadmap to help you achieve your goals. With a plan in place, we then build a portfolio of investments that fit the plan. The portfolio can be a mix of stocks, bonds, and alternative investments, in which we will periodically re-balance.

A portfolio is not, by itself, a plan. Therefore, planning is more important than returns; you need goals. A portfolio that is not constructed with your plan in mind is simply speculation. It can have no other objective than to beat the portfolio of your neighbor or your friends.

Beating your neighbors, so-called "out-performance", is not a financial goal. Paying for your kid's college or having a sustainable retirement income is a financial goal. If your portfolio beats your neighbor's and they run out of money at age 70, then you run out of money at age 72, congratulations, you win?

As a goals-based organization, we want to re-visit your financial goals as we progress through time. The amount you were planning on needing in retirement may change as you are and gather more information on the expected costs in retirement. As your goals change, your financial plan will change. This is a process that we will repeat: goals, plan to reach goals, investments that fit the plan for those goals. And repeat as needed.

While knowing that our long-term financial plan will dictate our portfolio, a portfolio is worthless if it cannot be adhered to in volatile conditions. Those investors who have the best long-term outcomes have the discipline to stick with these systems during temporary times when the systems are our of sync with the market.

At the core of our investment process are portfolio construction and risk management. The combination will help our investors have a higher probability of sticking with their portfolio and reaching their goals. Constructing the portfolio with diverse and low-cost investments with the long-term objectives in mind is at the center of our process. While long-term returns are the only ones that matter, we understand that is not where everyday life is lived. This is why we also implement a systematic risk management strategy to ensure that investors can handle the inevitable periods of volatility without jumping ship.

With a consistent focus on risk management, we look to balance short-term fears with the long-term objections so our investors can remain committed to their plan.

Both investment portfolio and financial plan are living and breathing things that do not just exist. They need to be monitored and revised as you make your way through life. The financial plan, well-thought out, and diligently adhered to is the cornerstone of a sound financial future.

If you would like to discuss your specific situation, please feel free to call us at anytime.

Thank you,

Jason

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