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By Steve Lowrie, Lowrie Financial
Special to the Financial Independence Hub
We’re on a roll with our “STOP Doing” ideas. In prior posts, we advised you to STOP feeding on junk media and STOP reacting to market noise.
Today, we’ll cover a great way to stop doing nearly every other bad investment idea out there: STOP trying to invest without a plan. Typically, this plan should come in the form of a detailed Investment Policy Statement (IPS) – a written agreement that you and anyone else who is helping you manage your money signs off on initially, and whenever you make changes to it.
Why be so formal about it? As a financial advisor, I often field questions from family, friends or acquaintances, asking me what I think about some current hot investment tip. The specific “opportunity” changes each time, but the reason I’m being asked about it does not. It’s almost always after strong past performance has captured everyone’s attention. A recent example: I was golfing with a friend last Sunday who proceeded to tell me about the great recent returns from Apple and Google. “If I had only had the guts to buy Apple at $6,” he bemoaned, “I would be really rich now.”
I think he was hoping I could name the next big Apple for him so, this time, he could get in on the action. Instead, I concentrated on my golf game – and mulled over how some things never change and some lessons are rarely learned.
The importance of a formal Investment Policy Statement
