And that slow train is now picking up speed.
“The greatest enemy of a good plan is the dream of a perfect plan,” said Carl von Clausewitz, a Prussian soldier and a brilliant German military theorist who lived in the early 19th century. A general who fought in the Napoleonic Wars, he went on to head the Kriegsakademie, the Prussian Military Academy, until his death in 1830.
Von Clausewitz was a prolific writer. He had many memorable aphorisms (“War is the continuation of policy by other means”), and his principal work, On War, has been widely read and directly influenced many of the major figures of the 20th century. His influence on strategy and tactics lives on today.
So why should we care about a dead Prussian? Because his “greatest enemy of a good plan is the dream of a perfect plan” absolutely applies to your investment portfolio. If you have a thoughtful and well-planned investment approach, apply it and resist the urge to constantly tinker with it to make it “better.” If it works well, you’re doing better than most and are far ahead of the game. On the other hand, if you don’t have a good plan, now really would be an excellent time to develop one.
Two years ago, I wrote a column titled “There’s a Slow Train a Comin’” (ABiz, October 2009). The thrust of the article was that the global debt problem was not only not being handled, but was continuing to grow. If left unchecked, it had the potential to really rock and ruin your day. Well, that train is still rolling. Check the news on any given day and catch up on the latest coming out of Greece. Or Italy. Or Spain. Those problems coming out of the south of Europe are simply one of the freight cars on what could end up being an uncomfortably long ride.
Could Europe eventually affect us here in Lafayette, Louisiana? You better believe it could. And while there is obviously nothing that you or I can do about the global debt situation, we can make sure our affairs are in order so that our investment portfolios are not too severely pounded should the turmoil continue. To paraphrase Churchill, not only are we not near the end of this mess, we’re still looking for the beginning of that end.
Memories are short. Already I am amazed by how so many have forgotten how devastating 2008 was to global economies, financial markets and individual portfolios. Our stock market crashed by nearly 60 percent, and our economy remains on life support. That terrible year changed countless lives — permanently — and not for the better.
I’m telling you as clearly as I know how: Examine your investment strategy and current asset allocations. Do it now. Recall 2008. If your current investment approach and allocation got you through 2008 with a minimal amount of disruption and anxiety, if it is still effective for you, DO NOTHING. But if 2008 rocked your boat, know this: That train is picking up speed, and it may be coming to a station near you soon. Make sure your investment accounts are allocated in such a way that might allow you to survive a financial crisis repeat intact — should it occur. If you feel you need help with this, get it. But don’t procrastinate. There is no educational value in the second kick of a mule.