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At Planning Solutions Group, we help many families and businesses develop an investment strategy to meet their goals and financial objectives. After establishing the plan, we offer ongoing advice on the portfolio assets.

Every day we make decisions about what to do with the portfolio. Most days the decision is to do nothing. This might seem very simple to do, but in reality it is extremely difficult to implement. It requires a tremendous amount of patience and self-control.

Let’s assume the following steps:

• Your advisor and you take the time to establish a financial plan outlining your goals and objectives.
• Your advisor designed an asset allocation strategy for your portfolio to fund that plan.
• Your advisor helped you select products (stocks, CDs, bonds, mutual funds, exchange traded funds) to meet that asset allocation.

After you have gone through this investment process, it may seem like the hard work is over. As experienced advisors, we know that while the activity may be ending the hard work is just beginning.

2016.06.24 Resist the Urge - image
A German military quote asserts that “no battle plan survives contact with the enemy.” Boxer Mike Tyson amended this quote by famously saying, “Everybody has a plan until they get punched in the face.” The chart above demonstrates that the greatest impact to our investment returns is not which assets or which funds we choose, but rather our own behavior that determines the results. How do we as investors handle getting (metaphorically) “punched in the face?” This data shows that the average investor changes their plan once adversity strikes.

Although vitally important, the true challenge is not creating the portfolio itself, but avoiding the behavioral mistakes/tendencies that can wreck a beautifully designed diversified portfolio. It is extremely difficult to resist the urge to make changes to our investments. Talking heads on TV tell us to buy or sell based on Brexit, Ebola, Fiscal Cliff, The Sequester, Cyprus, Trump or Clinton winning the election, ISIS, rising interest rates, falling interest rates, and the list goes on. It often seems better to “do something” just so we can feel good about taking action. Technology gives the ability to view a valuation of all of our investments at any minute on our cell phones. We also have the power to buy or sell investments from our phones or computers, sometimes for less than the cost of a movie ticket. This would have been unthinkable 20 years ago and now it is the norm. But is it actually producing better investment results?

Last week I had a great conversation with my client, “Stacey.” Stacey and I were discussing the fact that diversified portfolios have earned low single digits over the last 3 years annualized. It is hardly an exciting time for diversified investors. She understood the logic of the above chart, but said to me, “In my head, I understand that I should not do anything, but in my heart I cannot stop thinking that there must be something out there that I could be doing or something better I should be investing in. It is just so hard to sit still at times like this.” Stacey was articulating the urge to tinker with her investments. I am glad she brought it up because it allowed us to have that difficult conversation. After walking through the benefits of asset allocation and a diversified portfolio, she left the meeting feeling more confident that inaction was, in fact, the appropriate action.

One of the many values of a financial advisor is for him/her to tell the client to do nothing when doing nothing is the best decision. Warren Buffett wrote in his 1990 letter to shareholders, “Lethargy bordering on sloth remains the cornerstone of our investment style: This year we neither bought nor sold a share of five of our six major holdings.” It is very difficult to keep emotion out of our financial decisions. A strong relationship with a financial advisor will give you a reliable source of feedback when you feel the urge to tinker with your investments. This feedback can make a huge difference in preventing you from fixing something that is not broken.

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As a Family Wealth Advisor, Joe assists business owners, executives, and affluent families in the areas of estate planning, business succession planning, and wealth management. Joe takes pride in identifying a variety of planning options and opportunities followed by clear guidance to be sure his clients make the best possible decisions for their business and family. Through speaking engagements, Joe has addressed multiple trade associations to include the Restaurant Association of Maryland (RAM) and the National Automobile Dealers Association (NADA) Academy.

Joe holds the CERTIFIED FINANCIAL PLANNER™ (CFP®) designation and is a Chartered Retirement Planning Counselor (CRPC®). He is a member of the Financial Planning Association (FPA) and Financial Services Institute (FSI). While earning his bachelor degree at Washington College, he was awarded the Department of Business Management Award given to a graduate who shows outstanding qualities of scholarship, character, and leadership. Joe holds his Series 7, 66, and Life and Health Insurance license. He has also been recognized for a second year as a Five Star Wealth Manager,as featured in Baltimore Magazine.  Joe can be reached at: