Agility in Your Investing

Often people see their financial plans as fixed in stone. You don’t want to wander too far off your financial goals, yet goals change. Your plan must evolve with your financial objectives.

If you talk to a financial planner, the process usually goes like this:

Step 1. Determine your goals.

Step 2. Determine your risk tolerance, or comfort with potential losses in the market.

Step 3. Design a portfolio, within your risk tolerance, to achieve your goals.

Step 4. Help you stick with your portfolio through periodic rebalancing and tell you to hang on during market declines.

A fine theory. You have a goal or goals and if you can design a portfolio go give you the best chance of achieving them, what’s wrong with that?

For starters, the market doesn't care about your risk tolerance or your goals – it will do what it will. For example, let’s say in 2000 you’re 55 and want to retire in 10 years. Simple math says you need to average annual returns of 10% in your portfolio to reach your retirement goal. Anyone can design a portfolio to return 10% between 2000 and 2010.

That portfolio means nothing. In fact, you probably reached 2010 with about the same amount of money you started with, if you were lucky, after the crash of 2008. What will the market return over the next 10 years? Opinions of supposed market experts vary from single-digit returns to a doubling of markets. Who’s right – or even close? In effect you hold an allocation of assets that a financial planner guesses might earn 10% over the next 10 years, you rebalance allocation for the best chance of that return and follow advice to stick with it during market downturns.

Would you ever write a business plan and stick with it no matter what? No. Why would you design an investment plan and stick with it no matter what? New opportunities and new threats always pop up; your business plan needs constant updating.

Life as well as the market changes your financial goals. You get a new job, enter a new tax bracket, need more insurance, inherit a million or buy a home. You have a baby or get a divorce, or both. You hear a hot stock tip – or warning – that you want to act on, or you decide to file for Social Security at the minimum age or postpone filing until the maximum. You get sick. You recover from an illness, freeing you from high medical bills. Post-Defense of Marriage Act (DOMA), to cite one recent headline example, many same-sex couples must seriously re-evaluate their financial plans and goals.

In the example above, I cannot predict what mix of assets will return 10% a year for the next decade. Any planner who says they can cares more about their predictions than they do your goals.

Earn as much as possible with a risk level you feel comfortable with. Ride the bull and bear markets alike with agility and a willingness to respond to new opportunities and new threats.

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Matthew Tuttle, CFP, is chief executive of Tuttle Tactical Management in Stamford, Conn., and the author of How Harvard & Yale Beat the Market. He can be reached at 347-852-0548 or

Nothing in this article should be interpreted to state or imply that past results are an indication of future performance. Please consult your tax or investment advisor before making any investment decisions.
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