Ways To Overcome Inaction Investment Decision

People sincerely mean to do the right thing in their investment decision-making, but even with these best intentions, they are regularly derailed by procrastination and inertia. The long term implications are devastating.

Fortunately, there are a number of ways to minimize these very human but extremely damaging tendencies:

Do top-level, strategy-setting work with your adviser yearly

- Revisit and fine-tune goal-setting (being as specific as possible on time and dollar goals); and

- Review your allocation strategy to confirm that the risk/return parameters match these very particular goals.

Have your bank automatically wire savings from your income to your portfolio on a regular (ideally, monthly) basis

- This structures and streamlines your saving habits. Automating the process is an excellent commitment device that capitalizes on our good intentions – our promise to ‘save for tomorrow’; and

- Regular investment facilitates capitalizing on the significant long term benefits of a properly formulated dollar-cost averaging strategy; and

- Regular investing exploits our innate inertia: Once an automatic instruction is set up, you’re likely to keep it going. (It’s better to set up a standing instruction rather than writing a cheque each month – you’re more likely to follow through).

Conduct a systematic allocation-based review on a quarterly basis

- Reviewing your asset allocation weightings quarterly allows you to take regular snapshots of key allocation weightings. This regular maintenance highlights periodic, larger-cyclical shifts without being daunting in its frequency; and

- A quarterly review reduces the immensity of the review task – by maintaining regular updates, you won’t be tempted to delay.

Check your cash flows quarterly, then siphon off additional accumulated capital to your portfolio

- This reduces the size of the investment decision. We find it easier to make several small decisions than an equivalent large decisions (psychologically, people find it easier to make three separate decisions involving $500,000 each than one decision about $1,500,000). Use this to your advantage by regularly diverting accumulated capital to your portfolio.