Jon Evans, CFP®, AIF®

A few years ago, our family decided to get a puppy.  Some would say that’s a great decision, while others would not (Who doesn’t love puppies?).  We thought it would be a fun addition to our family and give our kids a chance to learn some lessons in responsibility.  And learn we have!

We’ve learned that legs of our kitchen chairs can be used as chew toys, socks left on the floor will be found and often mangled, and if a strict “potty regimen” is not kept –  yellow puddles appear all over the floor!

I can laugh about these now, as our pup has begun to kick most of these habits.  But these were tough lessons learned.  Looking back, I see some analogies that relate to a few key principles of wise portfolio management.  Hopefully, these are lessons none of us need to learn the hard way.

1.)  Protect the kitchen chairs.

You’ve worked hard to save and invest wisely.  Paying too much in fees can “gnaw” away at returns.  This simply creates extra drag on your account.   Make sure you keep an eye on how much you are paying, especially fund expense ratios and transactions costs.

2.)  Don’t leave your socks on the floor.

Keep an eye on things – don’t leave your portfolio unattended.  It should be monitored, and rebalanced periodically, to keep it in line with your goals.  It’s dangerous to assume your portfolio is allocated correctly, or say things like, “It’s probably just fine.”  This happens routinely with people who have changed jobs and left their 401(k) in their previous employer’s plan.  Losing track of how the account is invested can lead to a portfolio that may be too aggressive, or too conservative, for your situation.  Both can be detrimental.

3.)  Discipline is the antidote for “yellow puddles.”

This is critical. Discipline helps us do things consistently; often things that are hard (such as taking the dog outside every 40 minutes).  But the idea is that we’ll be better off for our efforts in the long run.  Investing certainly takes discipline.  Maintaining a long-term view even though we live moment-by-moment can be challenging, but is important to successful investment outcomes.   It takes discipline to hold a well-diversified portfolio and control emotions in the midst of market swings.  These are all easier said than done, but having the discipline to consistently do the “small things” right should improve our investment experience (and “keep the floors clean”).

Some folks say, “You don’t train the puppy – the puppy trains you.”  In my experience, there’s some truth in that.

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