A Radical Rethinking of How to Invest

Even before the recession, many people felt uneasy about their investment plans.

There’s a good reason for that.

As an investment adviser myself, I can tell you that most financial plans are based on little more than a series of smart, educated guesses: how much you’re “going to save”, how the market “is likely to perform”, how much such-and-such asset allocation “is likely to deliver.”

In fact, we can’t predict any of that. Life happens, the market goes haywire, the best-laid plans blow-up.

So what do you do now, chuck it all and stuff your money in coffee cans for the next 30 years?

Here’s a radical idea: Accept the uncertainty—and move forward anyway.

It’s unsettling at first. Everyone wants to hear that a portfolio of such-and-such funds will yield 7% on average by the time they retire.

The truth is, we don’t know. The reality is that we have to make plans anyway, starting here, starting now.

It’s like going on a cross-country road trip. You know where you want to end up. But you may not know every road you should take… until you get there.

So here’s your radical plan for 2011:
  Put a stake in the ground now. Pick a target-date fund or a certain investing strategy, set your savings rate, and move on. Write down your plan, put it in an envelope and open it in a year. Get on with life. You can reassess your plan in 2012.
Be here now. What can you do right now to move your plans forward?
  carl richards Carl Richards, aka “the napkin guy”, and father to three daughters and one son, is renowned for his weekly sketches on the NY Times Bucks Blog and is now a DailyWorth contributor.

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