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And many - if not most – traders and would be traders are guilty.
As the saying goes ‘fail to plan ….plan to fail’
I would go so far as to say that the majority of people will not succeed without a plan. I am not saying a plan will make you successful but it is a sound start to this very important venture. In my earlier sentence I was careful in my choice of words in that there are the rare few that will succeed by virtue of special qualities they possess – regardless of a plan. But these are a rare few and most of us have to work in a methodical manner.
So what constitutes a plan? Well anything about your ‘investment’ self is relevant. This will include your:
- Life goals and time span
- Investment goals
- Risk profile
- Skill level as appropriate to type of investing
- Funds available
- Fund allocation – shares/managed property
- Investment horizon
- Return expectations
- Commitment per week – how/when
- Investment tools and methodologies – by asset class
- Method of entry
- Exit triggers
It should also outline:
- What your overall risk management approach will be – in good and bad times
- What skill do you need to improve on?
- How and when you will review your positions?
Yes I am stating the obvious. And most investors know all of this sort of stuff – yet are too lazy or ambivalent to actually put pen to paper.
It is a crucial starting point. As a plan is not just a road map but it also helps us clarify our thinking and makes us think hard about what we really believe…. ‘How do I know what I think until I see what I write’ – or words to that effect - a power statement from P J Wodehouse.
Get cracking – pen to paper and you are half way there to removing yet another deadly sin that brings investors to grief!
Enjoy the ride
Tom Scollon
Chief Analyst
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