Imagine yourself this weekend… it’s a sunny summer day, and you need to take your dog Rufus for a walk. You’re making your way down the street to your favourite park, and as you walk by a local artist’s studio you happen to step in some blue paint. Faithful Rufus dips all four paws into a splotch of yellow paint. Neither of you notice the trail of footsteps and paw prints weaving behind you.
Once you get to the park you see the big open field of grass ahead. You decide you’re going to walk through the park to an ice cream shop on the other side. You follow the walking trail while Rufus meanders around, sniffing here and there. His leash is at a medium distance, giving him some freedom to explore.
When you get to the ice cream shop, you order a cone and sit down on a bench overlooking the park. Enjoying your ice cream, you finally look back to notice the trail behind you. While your blue steps are lining up in the same direction, Rufus’ yellow dog prints are zig-zagging around. Sometimes they’re close to yours, sometimes they’re further away, but only by a leash-distance.
Then it strikes you…
Rufus’ prints are like an investment portfolio, and yours are like an investment plan. Your blue steps show that you always knew where you were going and how to get there. Rufus, however, took a more temperamental path. Sometimes it looked like he was right there with you, while other times it looked like he was about to run astray. But you knew the leash was always there to keep him in line, and bring him back to you, the plan.
Without a plan, Rufus is just going to run circles in the park until he gets exhausted. There will be no ice cream for anyone. And if Rufus’ leash is set too long, it’s tough to tell if there’s even a leash at all.
Investment portfolios are only as good as their plans. Keep yours on the leash, so you can enjoy your ice cream.
Ben Kizemchuk is a Portfolio Manager & Investment Advisor with Altus Securities Inc. in Toronto. He offers financial planning and investment management for high net worth Canadian investors. Ben focuses on high quality investments, the Growth and Income Portfolios, low risk investing, and reducing tax.