Your Portfolio Isn’t A Financial Plan

Would your portfolio exist in a vacuum?

Not according to Quantum Physicist Carlo Rovelli. The properties of an object are how it acts upon other objects; reality is this web of interactions. Instead of seeing the physical world as a collection of objects with definite properties, quantum theory invites us to see the physical world as a net of relations. Objects are its nodes. 


Packy McCormick adds flavor.

Nothing exists except in its interactions with other things. Everything is a web of relations.

Scott Galloway reinforces this concept.

As Yuval Noah Harari has written, what led to the human species commanding life on Earth was our proclivity to communicate and cooperate in large groups. Capitalism taps this: The tools we use to increase wealth — entrepreneurship, entering new markets, achieving scale — don’t work without collaboration. 

McCormick continues, The best-designed software is worthless without users. The stupidest jpeg is valuable if others believe it is. Memes pull the web of relations in their direction.

Redwood trees are enormous. Despite growing almost 300 feet high, their roots are only 5-6 feet deep.

How do they manage to stay upright?

Groups of individual tree roots intertwine. Their connection keeps them from toppling over. Individually they’re weak; together, they’re a tower of strength.

The same goes for financial plans.

One component isn’t the plan. Only all the connected facets earn that title. One of the biggest problems in finance is thinking asset management is financial planning. The industry promotes this lie by labeling Money Managers as something they’re not. Collecting fees in a vacuum prevents investors from achieving their goals.

Mike Piper reinforces this concept. The financial planning industry grew out of the stock brokerage industry, so many still think of financial planners as “people who give investment advice.” But investing is only one piece of personal financial planning. And, frankly, it’s the easiest piece.

FYI – there’s no certification for character and honesty.

Asset management exists in a financial plan. Outside of one, it’s a harmful distraction, steering people away from achieving values that matter. Beating the market is irrelevant. Funding your goals is all that counts.

We’re not saying investment strategies aren’t necessary. The best ones are meaningless if you don’t stick to them through both thick and thin. My colleague Michael Batnick points out. The bottom line is that whatever strategy you employ, you need to have a plan. Without a plan, you’re never going to get to where you’re trying to go.

Can you imagine the following scenarios?

Buying insurance that doesn’t protect most of your assets.

Saving aggressively for retirement with no endgame.

Investing with complete disregard for your tax status.

Spending without a budget.

Doing everything right with your finances only to ignore your mental and physical health.

Setting up a college plan but not coordinating it with your retirement goals.

Letting the courts decide the disbursement of assets it took a lifetime to accumulate.

The interactions bring them to life.

Placing the different components in a silo deposits your financial goals into an alternate reality.

Connecting the dots is the most integral component of a sound financial plan.