The Madness of Methods

Over the last few months, many of my Thoughts On Money have revolved around the importance of marrying one’s financial plan and investment management. That is to say, that the financial plan should be the driving force behind how an investment portfolio is designed.

Now, I am not talking about a “financial plan,” as in, a 100+ page bound printout that makes its way from your advisor’s office to being a dust-collecting–paperweight at your home. I mean, the actual planning of finances – the living document, the dialogue, the collaboration around how to best plan all of your money decisions.

Often this is not the case, though; these two practices – financial planning and portfolio construction – are held in isolation and not seen as a collaborative exercise.

This is a problem.

This results in investors and many advisors trying to develop alternate (sub-optimal) methods for how to best design a portfolio. Some will conclude with a one-size-fits-all age-based solution, and some will try to navigate these waters with a risk-survey-only driven process. Today, I want to teach you about a process I call Expense Based Planning (EBP).

Links mentioned in this episode:

• http://thoughtsonmoney.com
• http://thebahnsengroup.com