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Investing Doesn’t Always Equal Financial Planning

Investing Doesn’t Always Equal Financial Planning

Oct 4, 2017 | Blog

A few years ago, we touched on the topic of Investing vs Financial Planning. Spoiler: they aren’t always exactly the same thing. Today, we’re revisiting that topic.

The Grocery List Analogy

When we bring a list and plan for a grocery trip, our likelihood of success goes up tremendously. When we don’t bring a list with us, sometimes we’ll buy things we don’t need (or forget things that we do). Have you ever asked yourself whether you handle your retirement plans the same way? Are we buying investments or are we following a financial plan?

So What’s the Problem?

People often assume these two ideas are one in the same, however, they are actually two completely different behaviors. People who buy investments generally define success as a positive market gain. While this sounds like a very logical expectation of an investment, three main problems come with quantifying that success:

  • Over what period of time?
  • How much positive gain was there?
  • And when do we sell?

In other words: A positive gain isn’t merely a win and negative gain a loss. The movement of the market over the first week, month, or year of the investment can have a huge influence over our behaviors. Most people would agree that determining the direction of the market over a short period of time is nearly impossible. However, it becomes the key factor in determining success for investment buyers.

Buying investments is often about “wins” and gains – whereas financial planning has everything to do with specific and clearly defined objectives through the use of market investments. Financial plans use market-related investments as a way to help move the plan forward. But, success isn’t solely based on market movements. Contribution amounts, portfolio rebalancing, and withdrawal amounts and timing all factor into the successful outcome of a plan.

If you’re simply buying investments and not using a financial plan, contact us – we’re happy to help.

Walkner Condon Financial Advisors is a registered investment advisor with the SEC and the opinions expressed by Walkner Condon Financial Advisors and its advisors in this piece are their own. Registration with the SEC does not imply a certain level of skill or training. All statements and opinions expressed are based upon information considered reliable although it should not be relied upon as such. Any statements or opinions are subject to change without notice.

Information presented in this piece is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed.

Information in this piece does not take into account your specific situation or objectives and is not intended as recommendations appropriate for any individual. Readers are encouraged to seek advice from a qualified tax, legal, or investment adviser to determine whether any information presented may be suitable for their specific situation. Past performance is not indicative of future performance.