Why are you investing? What are your priorities? Where is your destination? When do you hope to get there? But it's the 'how' that's often overlooked.
'How' relates to process. It's not just what you invest in, but the approach you take to investing. This means adopting set guidelines to deal with whatever financial markets, and life generally, might throw at you on the way to where you're going.
Of course, processes work best when they are integrated. Otherwise, a minor change elsewhere can throw you off track. Think of what happens in a restaurant if attention to the quality of ingredients, menu and execution in the kitchen is not matched by attention to quality of service in the dining room.
Likewise, an investor who has agreed with her adviser on following strong processes around her individual plan will not be served well if those managing her money are not delivering on what they said they would do. In contrast, integrated processes that share and maintain a single vision tend to reinforce each other.
Ultimately, process provides structure for your investment journey. The world will always be complex and uncertain, and there will always be a host of potential distractions. But just having a structure in itself can deliver you a level of reassurance.
With a process, you are less likely to pursue the uncontrollable or unrepeatable – whether wasting time and money trying to second-guess markets, chasing last year's winners, or switching your investment strategy based on whatever is fashionable at any one moment.
Instead of trying to ride your luck or intuition, you are methodically and steadily following a repeatable and defensible process that your adviser has designed with your goals, circumstances and preferences at heart.
Recently, one of America’s largest life insurers (New York Life) did a survey of over 2,000 people to find out what they considered to be their largest financial mistakes, and how long it took to recover from them.
The investment industry is responding, first with a much-improved range of products and more latterly with simple ways for people to find out more.
Rob and Mary