Our Five Step-Process for Creating a Personalized Investing Plan
by Charles Rotblut | May 28, 2020
Charles Rotblut recently spoke at the AAII Investor Conference 360. Video replays of all sessions are available for purchase. Go to www.aaii.com/investorconference for more details.
“The AAII Way” (code-named for now) is intended to help you and your fellow AAII members create a comprehensive plan that can be your investing guide. At its heart are the five key steps, shown in the PDF linked below. Each step of the process is dependent, meaning one step must be done before moving onto the next, and a change at the top or bottom can lead to a comprehensive review. Picking an allocation strategy without knowing what you’re investing for can leave you holding a portfolio unsuited to achieve your goals. Similarly, it doesn’t make sense to select specific investments without first identifying what your investing preferences are.
You can learn more about the logic behind the process by reading either the May 20, 2020, Investor Update or the June 2020 AAII Journal, which will be available online on June 1.
Does this process work for you? Is there something you would suggest we change? Email us or post your thoughts below.
Discussion
JOSEPH C from CA posted over 5 years ago:
I would add a step to your currently listed five steps. The step can be titled "Secular Influences," or something to that effect. This step would be separate from "Life Stage or Family Changes" considerations. It would account for any modifications triggered by unpredictable (Black Swan) events that are likely to influence investments over at least a three-to-five year period after the event takes place. This event could trigger modification of asset allocation for certain investors. For example, the recent unprecedented lowering of short-term interest rates to near zero and much lower long-term rates to combat the potential effects of COVID-19 had dramatic effects on the returns of new money targeted for investment income to support income-dependent retirees. According to the Federal Reserve Chairman, these lower rates will be in effect until 2023. For retirees, it would be wise to divert new money from bond-like assets that yield very low income returns to equity assets paying dividends that are likely to grow over time. Having such a step in the process would flag investors and make them more aware that the investment landscape is not static, but changes with significant events over an investors lifetime. ----Joe Cardinali
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