You've likely heard of the 80/20 rule. The rule suggests 80% of an outcome is often the result of just 20% of the effort you put into it. 

The rule doesn’t always work; sometimes, it’s worth going the extra mile. But often, by prioritizing the 20% of your efforts that makes the biggest splash, you can reduce excess commotion. In that spirit, we offer you three best practices that pack a lot of value per “pound.” 

1. Investing: Be There, and Stay There

You could do far worse than to invest according to a sentiment attributed to Woody Allen:

“80% of success is showing up.”

Going back to 1926 and after adjusting for inflation, U.S. stocks have delivered about 7.3% annualized returns to investors who have simply been there, earning what the markets have to offer over the long haul. Those who instead fixate on dodging in and out of hot and cold markets are expected to reduce, rather than improve their end returns. That’s because, when markets recover from a downturn, they often more than make up for the stumble quickly, dramatically, and without warning. Instead of chasing trends, simply stay invested over time.  

2. Portfolio Management: Use Asset Allocation, and Don’t Mess With the Mix

Asset allocation is about investing in appropriate percentages of security types, or asset classes, based on their risk/return characteristics. For example, given your financial goals and risk tolerances, what ratio of stocks versus bonds should you hold? What percentage of small value stocks versus large growth? How much domestic and how much international?

Both practical and academic analyses have found that asset allocation is responsible for a great deal of the return variability across and among different portfolios. So, to build an efficient portfolio, we advise paying the most attention to your overall asset allocation, rather than fussing over particular securities. And by the way, once you’ve got a personalized asset allocation in place, the only reason to change it is if you change. If you’re tempted to alter your allocations based on current market conditions, circle back to our first point.  

3. Financial Security: Freeze Your Credit Reports

Even the best-laid financial plans can be thwarted if your assets are exposed to financial scams and identity theft activities. Fortunately, there’s a lot you can do to secure what you most easily can. We’ve written a quick-reference guide on the topic and posted to our blog - Avoiding Financial Scams: Quick-Reference Guide.

If we were to pick one practical, but often overlooked punch that delivers among the biggest blows to identity theft , it’s the ability to freeze your credit reports.

Freezing each of your accounts with the three major credit bureaus (Equifax, Experian, and TransUnion) is like locking the doors to your home or vehicles. It creates a few extra steps for you, as you’ll need to temporarily lift the freeze when you wish to take out an occasional loan. But it costs nothing to set up and manage. And if an identity thief does get ahold of your information, it should stop them if they try taking out lines of credit in your name. This strikes us as an 80/20 trade-off well worth making. 

Building Lifetime Wealth, 80/20 Style

Properly applied, the 80/20 rule can help minimize the time and energy you have to put into maximizing your financial well-being. Whether you’re saving for retirement, funding your children's college education, preparing for wealth transfer, applying for insurance, or otherwise managing your hard-earned wealth, our objective is to help you identify and execute these and other actions that matter the most, so you can get back to the rest of your life. Please be in touch if you would like to discuss.