Some critics of these methods say these rules are too rigid – they don’t offer flexibly for what’s happening in the markets today. Well, THAT’S what discipline means! It’s discipline that makes a plan work. Create a plan and stick to it.
Part of your plan may be to make an asset allocation change at the appropriate time in the future when your own life’s circumstances have changed. These circumstances can be related to your health, career, retirement, a lump-sum windfall or a similar life-changing event. The shift may result in a different allocation, but it remains just as important to maintain discipline.
Investment discipline is easy to read about. It’s the same as a doctor telling you to exercise regularly, eat right and get plenty of rest. It sounds so easy when someone else says it! Yet, in real life, it’s not so easy to do. That’s why we have to be reminded to be disciplined. My advice is to re-visit this post whenever you may doubt your discipline.
Remember, a well-balanced portfolio works if you actually do it – in good times and in bad. For more information on this topic, please read All About Asset Allocation, 2nd edition, McGraw-Hill, 2010.
