For some investors, there is never "enough"; they always push for "more". They want to maximize their investment returns for the level of risk taken. For years, financial planners have used "portfolio optimizers" that purport to match risk and reward precisely. The idea is fine since risk and return are related over the long term. However, an unintended by-product of this is what we might call "the optimize/maximize fallacy". In essence this describes the mentality of an investor that is disjoined from his lifetime goals and instead focused on maximizing short term returns. Except by luck (chance), this is doomed to fail.

You can never, ever reach the point where investment returns are maximized since it is a theoretical construct. Like the horizon in the sky, the closer you move , the further away it seems. Nonetheless, the "optimize/maximize" investor prowls the financial lands always in search for "more". It is a destructive financial approach and derives from a lack of clear, concise lifetime financial goals. Investments, after all, are just a tool to help investors achieve goals, not a forum where short term returns are "maximized".

In many respects, the entirety of the "maximer" approach is the result of framing the wrong question - "Where can I obtain the highest return?" The wrong question is quickly followed by wrong answers: "market timing; individual stocks; actively managed mutual funds; annuities, etc."

From an advisor perspective, clients that lack real goals tend to be transitory as there is always "greener grass" somewhere else (or so it appears to them at the time). One of the reasons that we insist on a financial planning perspective is that investment management detached from planning is simply a crap shoot. Our long term philosophy is attuned to achieving and maintaining financial independence, not maximizing short term returns. We invite you to view the above video, the first one of a series, that discusses some "Timeless Wisdom Principles" that we consistently endeavor to inculcate in our clients.   

Our theme this year is "Wealth by Intention". Please let us know how we can be of particular assistance to you.