Calculadora-1-1241312“Drafting an intelligent financial plan is just one way for you to get ahead of the crowd and make sound investment decisions on Wall Street.”

Successful investors understand the importance of creating a well-thought out long-term financial plan. Failing to plan, is a primary reason why so many people under-perform their goals each year.

A recent article in Forbes, “3 Common Mistakes to Avoid When Making A Financial Plan,” describes these miscues:

  1. Not Creating a Comprehensive Plan. A major error most people make when creating a financial plan, is that their plan is too narrow. A sound financial plan is comprehensive in nature and covers all areas of your life, rather than only a single area like an investment portfolio. It should address tax issues, risk management, estate planning, and long-term care needs. These are all vital when creating a solid long-term financial plan.
  2. Creating a Balanced Portfolio but Never Re-Balancing. Another frequent mistake people make is creating a balanced portfolio—and then not re-balancing it on a regular basis. You should maintain the portfolio balance, as the market ebbs and flows. The original portfolio can and will change over time, as events like market rallies naturally increase overall equity exposure, or retirees take required minimum IRA distributions that may cause an over- or underweight to equities.
  3. No Follow-Through. The third mistake commonly committed by investors when creating a financial plan, is that they spend time creating their plan, but they don’t follow-through and act. You must implement your plan.

Of course, there are plenty of other investment miscues that people make. They try to out-think markets, sell off equities when markets sink, and think short term, rather than keeping the big picture in mind. A comprehensive plan is constantly evolving. It needs to be flexible to address changing needs.

Reference: Forbes (April 6, 2018) “3 Common Mistakes To Avoid When Making A Financial Plan”

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