Set and forget at your own risk - not that of dependants

We are on the third and final part of our series "A Trading Plan for Investors", based on the trading plan that traders use. We have adapted it for investors.
By · 23 Nov 2013
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23 Nov 2013
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We are on the third and final part of our series "A Trading Plan for Investors", based on the trading plan that traders use. We have adapted it for investors.

So far, we have looked at setting goals, deciding which entity to trade in, which mechanism to use to physically trade, whether to go full service or online, which information services to use, and which style of investor we want to be (short or long term).

We assumed long term, then we discussed how to pick stocks, position sizing (risk management) and "loss control". This week we finish with "Attrition" or, more simply, paying attention.

If you're the sort of muffin that only finds out how good you are at managing your SMSF when you collect the paperwork for the accounts at the end of the financial year, you really shouldn't be managing investments at all.

If you had money in a managed fund and you rang the fund manager to ask how it was going and he said "I'm not really sure", not only would you sack him or her, you'd be ringing his boss and his boss' boss and giving them all a flea in the ear.

Managing money is a responsibility. If it's your money, fine, you're perfectly entitled to abuse yourself with your own carelessness, but if you have dependants, not knowing what's going on is irresponsible, if not negligent.

You can test this of course. If you're sitting opposite the person running your retirement fund this morning, casually ask them how much you're up or down this week or this year and see what they come back with. If they don't start energetically telling you about this success and that failure, maybe you should get yourself another fund manager because the current one is obviously lacking interest.

If, on the other hand, you are the one managing the SMSF and you care yet you can't answer the question, it is almost certainly because you don't have a system in place to help you.

Improving your experience is not rocket science, it simply comes down to the discipline of setting a timeslot for your investment activities - say, Sunday morning for an hour - and having a routine that you enthusiastically perform at the beginning of that hour. This is the fun bit, putting in all those prices and finding out what's going right and wrong and deciding what to do. You should look forward to it.

Whether you're an investor or a trader, the routine is the same and would involve you measuring your overall trading performance (updating the spreadsheet), comparing that to your personal benchmark (you know, the one you set at the beginning), working out why your performance has been better or worse than you'd hoped, deciding what you have been doing right or wrong and, taking all that into account, what action you need to take immediately or forever to improve or perpetuate your performance the following week, month or year.

It's only when you've been through this routine that you'll be able to work out whether you should reset your goals, bite the bullet on investments going wrong, stop reading posts, change brokers, extend your time horizons, stop reading short-term crap and subscribe to a real newsletter such as Marcus Today.

These are all things that should go through your brain when you open your spreadsheet, and all things that won't go through your brain if you don't have a routine or hold yourself accountable to yourself and your dependants.

Finally, I wrote a surprisingly popular article once called "The Boat Fund" (available on my website) about managing risk by diversifying the investors rather than the investments.

This "Investment Hour" is when you do that; when you ask your dependant(s) to help, give their input, share the decisions, halve the responsibility, express their expectations, and comment on what's going on.

Locking horns with your family in an intellectual pursuit like the management of SMSF investments with a mutually beneficial objective can only be good for a relationship. An hour sharing the joy of your SMSF also saves you from having to spend five hours on the weekend engaged in fishing, golf, sailing, boating or cycling - the known divorce sports. The fund that keeps on giving.

That's it for the Trading Plan for Investors, now you're on your own. Good luck.
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