This is the time of year where people often set…and let go of….New Year’s resolutions around things like health and fitness.
I decided long ago that the one of the best investments I could ever make was in my health, so I am very fortunate to maintain a consistent year-round routine when it comes to things like nutrition, strength training, cardio, mobility work, meditation, etc.
As such, I often get asked questions in the gym along the lines of ‘…what is the best lifting routine?’ or ‘what is the best diet?’
The answer to all of these questions is essentially the same:
The one you can stick to.
Yes, there may be some specific nuances depending on your goals, current circumstances, etc. – but ultimately, we are talking about creating a lifestyle – something you can sustain indefinitely – not a quick fix that just gets reversed when willpower or motivation falls by the wayside.
So how does this relate to investing?
As with nutrition, there is often more than one way to achieve a given goal (as in a range of reasonableness). Should you be 90% stocks and 10% bonds for your retirement account you won’t touch for 10 years or more? Or 80%/20%? For two investors with the exact same circumstances, one may be better served by having a slightly higher bond allocation. Why?
The sleep at night factor (aka, the plan they will stick to and not abandon at the first sign of market turmoil).
An investor is far better off sticking to an 80%/20% plan for 10 years than starting with an objectively more optimal (on paper) 90%/10% split, only to shift that to 100% cash just at the wrong time (as in when the market goes through one of its inevitable corrections), locking in losses and likely only repurchasing stocks after the crisis has passed and prices are back up again (i.e. selling low and buying high which is why most investors earn about a third to half of stock returns over time).
Remember, a sound investment plan is not a contest between you and a fully invested stock market index like the S&P 500. A stock index does not need to pay bills, it does not worry about politics or the loss of a job or the price of eggs at the grocery store or if a child is going to need assistance after college if he does not land a job. A stock market index does not have to take any real-world factors into consideration.
But you do.
So, when you are creating your investment plan, think about what you can sustain – what you can live and stick with under all market circumstances, not just ideal market conditions. Even if that means having slightly less stock exposure than is objectively optimal, you will end up far better off in the long term having stayed the course by being a bit more conservative.
It would be like the person trying to lose weight telling his personal trainer, ‘I get it – on paper I should not have my weekly doughnut, but it makes me happy and allows me to stick to my otherwise healthy diet’. The response to that should be, ‘…weekly doughnut it is.’
Here’s to a healthy, peaceful, prosperous 2026!