When investing, focus on these four matters annually

I am occasionally asked by a prospective client to cut to the chase and give investment advice. They want to skip planning and jump right into portfolio design.

There’s a fairly common perception that has been communicated by Wall Street and the media that our profession is more akin to TV celebrity Jim Cramer, who hosts “Mad Money.” Generally speaking, my experience has been that successful investing is goal-focused and planning-driven, while most of the failed investing I’ve observed has been market-focused and performance-driven.

Morningstar and Vanguard both published some interesting research speaking to the value of working with an adviser. While they both concluded that the profession provides significant value, neither spoke to stock tips or fund picking as a value add.

Their analysis placed a much-higher emphasis on helping clients put their financial houses in order, coordinating their investments with their planning and maintaining discipline during periods of market trauma. I liken our true value to a quote by General Omar Bradley: “Set your course by the stars, not by the lights of every passing ship.”

So the question remains, what financial information should you be focused on? Here are four basic areas to make sure you have a good handle on and to review at least once a year.

Goals and objectives

Where are you going? The Cheshire cat told Alice, “If you don’t know where you are going, any road will get you there.” Without direction, without a destination, without a goal, how do you pick a solution, choose a road or plot a course to get there?

A professor once told me that if you can’t measure something, it doesn’t exist. Defining your goals and measuring progress allows you to focus your efforts and find peace when surrounded by conflicting advice.

Personal financial statement

A personal financial statement reviews assets, liabilities and insurance to better understand resources available to meet your goals. With an updated statement, you can more effectively manage assets to generate short-term income versus long-term growth needs.

A good statement also will detail titling of assets and ensure you are best positioned for additional objectives such as asset protection, tax management and legacy goals.

Portfolio construction

Investment management has adapted more in my 20-year career than at any other time – but strategically there are just a handful of strategies.

By constructing a portfolio that is aligned with your family’s objectives, you give yourself a better chance at success. What’s important is to find a strategy that makes sense to you, re-balance periodically and stick with it.

The big mistake comes when in the middle of chaotic markets, you tell yourself what Sir John Templeton deemed the four most dangerous words in investing: “It’s different this time.”

Before you succumb to such a belief and sell out, I implore that you seek a qualified professional to run the numbers and review the ramifications.

Estate planning

Estate planning is not just for the rich, nor is it only about death. According to AARP, mild cognitive impairment affects about 22 percent of those 71 and older.

Without basic estate planning documents, your loved ones will have a difficult time making medical and financial decisions on your behalf without a court order and possibly a guardianship appointment. This, of course, takes time and money and can lead to additional frustration on top of dealing with an incapacitated spouse.

Estate taxes have changed dramatically in the past several years and as such a review of your older documents would be in good order. Additionally, powers of attorney are often a source of conflict with financial institutions and should be reviewed regularly to ensure there are no issues with acceptance.

What’s most important to you and how can you best secure it? Financially speaking, the answers are most likely not going to be found watching investment talk shows.

Focus on what you have most control over and put together a plan to best address the various issues. Review your objectives and how your financial decisions are moving you toward your goals and away from potential obstacles.

Once you have put the time and effort into your plan, don’t forget to stop and smell the roses.

This story was originally published May 8, 2017 at 1:00 PM with the headline "When investing, focus on these four matters annually."