Investment Strategy…using an Index Card

Aug 3, 2015 • Written by Paul Staib | Certified Financial Planner (CFP®), MBA, RICP®

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Investment Strategy - Index Card

Harold Pollack, a professor of public policy at the University of Chicago, generated a good deal of buzz a few years ago by scratching out “all the financial advice you’ll ever need” on a 4×6 index card.

Now you may disagree with a few of Pollack’s items (such as his guidance to avoid picking individual stocks and to skip actively managed funds), but it’s hard to disagree with Pollack’s overarching goal of helping investors cut through the clutter and focus on what really matters. From a 3,000 foot conceptual level, investment management doesn’t have to be complicated. Instead of getting bogged down in complicated and often expensive products and strategies, investors have a better shot at reaching their financial goals if they tune out the noise and focus on basics like saving enough and taking advantage of tax-sheltered investment accounts.

While an investment strategy which fits on an index card is no substitute for a comprehensive investment plan, the exercise to distill your own “financial plan” into just a few easy-to-understand sentences (or at least get them onto a single note card) can serve several important goals. It can be a great starting point for developing a more detailed financial plan and it can provide guidance and help ensure that your plan isn’t too complicated and doesn’t require too much maintenance on an ongoing basis.

Employing a streamlined, straightforward investment strategy can also be helpful from the standpoint of succession planning for your portfolio. If you can’t explain your investment approach to your spouse, trusted adult child, or other loved one in plain English and in just a few sentences, it would probably be difficult for them to manage without a lot of hand-holding from you. Portfolio succession planning is important at every life stage, but especially for older adults who are actively drawing at least a portion of their living expenses from their portfolios. It’s important that your spouse knows which accounts you’re relying on to fund your ongoing living expenses.

Having a skinnied down, clearly articulated investment strategy can also serve as a litmus test for the specific investments you hold or might consider buying in the future: if an investment (or product) doesn’t sync up with the simply stated strategy, then it probably isn’t a good fit for your portfolio.

The Challenge

Even if you don’t have any note cards handy, you can still take up the challenge of simplifying your overall investment plan/strategy into just a few sentences or bullet points. For someone saving for retirement who favors mutual funds, the investment strategy note card might resemble something close to the example below.

Investment Strategy - Index Card

The results may be different for someone who is in retirement and drawing income from their portfolio or for someone who favors individual stocks rather than mutual funds, but the exercise is comparable.

A Jumping-Off Point
Your “investment strategy on a note card” provides a solid foundation for creating a more detailed investment strategy document, containing such details as the specific parameters to be used for selecting individual investments and what triggers are to be used when deciding whether to sell.  It also can detail more specifics associated with target asset allocations, and how it may evolve over time.

Paul Staib | Certified Financial Planner (CFP®), MBA, RICP®

Paul Staib, Certified Financial Planner (CFP®), RICP®, is an independent Fee-Only financial planner. Staib Financial Planning, LLC provides comprehensive financial planning, retirement planning, and investment management services to help clients in all financial situations achieve their personal financial goals. Staib Financial Planning, LLC serves clients as a fiduciary and never earns a commission of any kind. Our offices are located in the south Denver metro area, enabling us to conveniently serve clients in Highlands Ranch, Littleton, Lone Tree, Aurora, Parker, Denver Tech Center, Centennial, Castle Pines and surrounding communities. We also offer our services virtually.

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