Be SMART, Write it DownSubmitted by Grunden Financial Advisory, Inc on June 29th, 2012
Most people don’t just stumble upon success, they have a vision and find a way to make it a reality. This simple truth may be applied when thinking about investments. There is a natural curiosity to know the “secrets” of a successful investor, but the better thing to understand is how success became theirs. More often than not, investing success is found in goals & timetables included in a written investment plan or policy statement they developed for themselves.
Physically writing down goals is the first step many successful investors take. Investing just to invest or saving just to save isn’t really a goal…and it isn’t written down, either. A great strategy follows the SMART acronym:
Written goals will direct in advance what actions investors are (or aren’t) willing to take and should be included in the beginning of the investment plan or policy.
Once goals are set, the next step is to determine how you will accomplish them. This is the nuts and bolts part. How much should you invest in stocks?...in bonds? Will you buy stocks or mutual funds?...why? Good investment plans will not predict the future, but they will provide direction and remind one of the reasons the investments were made in the first place. If the stock market is choppy, look to the previously written investment plan. Investment decisions made as a result of a news stories are reactionary and may contradict the original investment plan.
The best investment plans also give progress reports. As investors periodically review their accounts, it is important to know how close they are to accomplishing the original plan. Without a plan in place, decisions about major purchases or even retirement are made in a vacuum. The knowledge provided by investment plans can help provide peace of mind or create a cause for concern so investors have time to develop further action.
It is important to also remember investments are just a tool used to help achieve what’s important. Many people want to know the investing “secrets”, but best thing to know is why successful investors became successful: writing down goals in an investment plan. After the plan is in place, investments become a means to an end.