“A goal without a plan is just a wish.”  ―Antoine de Saint-Exupéry

For any strategy to be successful, you must have a plan for implementing it. This is true in sports, military campaigns and especially investing. While investing without a plan may yield some positive returns (even a blind squirrel finds a nut once in a while) in the short-term, it’s unlikely that you will achieve consistent success in the long run. I believe this is true for traders as well as long-term investors.

Planning is a relatively simple process that involves four basic components:  (1) setting objectives, (2) being honest about your risk tolerance, (3) managing return expectations, and (4) the discipline to stick with your plan even in the face of adversity. Let’s take a look at these four components individually.

NOTE:  We create an Investment Policy Statement (IPS) for our clients based on their unique goals and risk tolerance. The IPS—which is agreed to and signed by the client—provides us with guidelines on how to manage their portfolios. It is reviewed at least annually.

Setting Objectives

Planning starts with identifying and setting your investment objectives. An objective can be something as broad as retiring with $1 million in assets, or something as focused as earning a 20 percent return on an individual stock. The nature of the objective is not as important as making sure that you have a reasonable chance of reaching it. After all, you don’t want to set yourself up for failure right out of the gate.

Once you’ve identified your goals, you should prioritize them based on their overall importance, the timeline for achieving them, their potential financial cost, etc. You should also review your goals on a regular basis to confirm their continued relevance and your progress toward achieving them. It’s important to remember that financial goals are not a set and forget proposition.

Risk Tolerance

All investing entails risk. Conventional wisdom dictates that the higher an investment’s risk, the greater the potential return. But this doesn’t mean that you as an individual have the emotional ability to tolerate the kind of volatility that typically accompanies such risk.

Your plan must include an honest evaluation of your financial ability to assume risk and your emotional risk capacity. Once you do, you can begin to construct a portfolio that has the right balance of risk and reward. Also, risk tolerance changes over time, so you must go through the evaluation process periodically to make sure your investment portfolio matches your risk profile.

“If you don’t know where you are going, you’ll end up someplace else.”  ―Yogi Berra

Return Expectations

I think it is safe to say that everyone would like to double their return on every investment. Obviously, that’s unrealistic. One of the most important things we do for our clients is to manage their expectations about returns on their portfolios. We do this by constructing a customized portfolio based on their unique needs.

We then evaluate historical returns of portfolios with a similar allocation and discuss with our clients the outlook for expected returns in the years to come. Of course our outlook and yours must take into account the potential effects of inflation and taxes.

Disciplined Approach

Once you have your plan in place, you must take a disciplined approach to implementing and managing it. While it is critical to periodically evaluate your plan and make appropriate tactical changes, it is irresponsible to make wholesale changes in reaction to a single economic or geopolitical event, or to things you read, see or hear in the financial media.


The most important thing to keep in mind when creating or managing an investment plan is that it is a living document that will serve you through your retirement years and beyond. To ensure the plan works as designed, it must be reviewed and updated from time to time. The review must include reevaluating your risk tolerance and making tactical portfolio adjustments as necessary.

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David L. Blain, CFA, is president and chief investment officer of BlueSky Wealth Advisors, LLC, an independent registered investment advisor (RIA) doing business as D. L. Blain & Co. in New Bern, North Carolina and Pleasanton Financial Advisors in Pleasanton, California. You can contact David at davidblain@blueskywa.com.


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