Inertia Can Be Expensive in Financial Planning

Inertia is one of the most prevalent yet overlooked obstacles to financial planning progress. Financial and investment decisions that you made years ago might no longer make sense for your circumstances today. But, oftentimes, inertia prevails. Inertia is a law of physics, but it’s also a strong emotional force that can derail even your best-laid plans.

How to Fight Inertia in Financial Planning

1. Consistently Revisit Your Goals

The cost of failing to address changes to your financial planning goals and underlying circumstances can be substantial. Ultimately, this can be the difference between financial success or failure.

One way you can root out inertia is by looking at each position in your investment portfolio from time to time to determine if it still fits your circumstances. When we’ve done this exercise with new clients, it’s eye-opening to hear the history behind particular investment decisions.

It’s not unusual to find that certain investments were reasonable years ago, but don’t make sense any longer. Perhaps your risk tolerance has changed; maybe your need for liquidity is different today. There are countless reasons, but without actually examining the components of your portfolio, status quo and inertia have the upper hand.

2. Provide Regular Review of Your Portfolio

As physics teaches us, an object at rest tends to stay at rest. I’m not suggesting that you day trade your investment portfolio, but some degree of regular review is needed to assure continuing alignment with your goals. That’s one aspect of what we provide within the financial planning process.

Perhaps you’ll find that few changes are needed, or maybe significant rebalancing and repositioning are indicated. Either way, it’s a crucial, yet underrated part of financial planning.

3. Be Persistent

Sometimes, making changes to your investments is easy; other times, it’s complicated. It seems a feature of modern life is that certain institutions make change very challenging.

I recall cancelling our home phone 15 or so years ago. My wife had already tried to cancel it, but the account predated our marriage and was only in my name. I made the call, and almost 30 minutes later, after resisting numerous attempts to “upsell”, I was finally able to accomplish the task.

Breaking through inertia sometimes requires significant effort. Generally, it’s a worthwhile endeavor.

Some brokerage firms, banks, and insurance companies make the process of change difficult. We can usually help, but just as I discovered with my old phone account, sometimes only you can initiate the process.

Why Portfolio Resetting is Important

One of the underlying reasons for the discipline of regular portfolio rebalancing is to help save you from the grasp of inertia. Rebalancing is a practical way to acknowledge that it’s important to review and reset your investments from time to time.

Resetting your portfolio is similar to rebalancing, but is focused on bringing your portfolio back into sync with your broader long-term planning priorities. If your portfolio and your priorities aren’t coordinated, you shouldn’t be surprised when you don’t accomplish your goals. Changing course when needed can be the difference between long-term success and failure.

Change can be uncomfortable, but never consciously considering changes, when needed, can wreck your financial progress. Start there. Ready for a real conversation?

Disclosure

Apollon Wealth Management, LLC dba J.E. Wilson (Apollon) is an investment advisor registered with the SEC. This document is intended for the exclusive use of clients or prospective clients of Apollon. Any dissemination or distribution is strictly prohibited. Information provided in this document is for informational and/or educational purposes only and is not, in any way, to be considered investment advice nor a recommendation of any investment product or service. Advice may only be provided after entering into an engagement agreement and providing Apollon with all requested background and account information. Please visit our website https://apollonwealthmanagement.com for other important disclosures.