To prepare or not to prepare?

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Military planning is meticulous. “The military currently uses what’s called the seven questions, across NATO. Those are seven comprehensive steps throughout the planning cycle,” says Chris Hunter, a former bomb disposal expert and senior IED intelligence analyst to the US Department of Defense and the UK government.

This seven-step process begins with a review of the situation. It then goes on to cover mission analysis, an evaluation of factors, guidance from superiors, further evaluation, refinement and – eventually – the formulation of a plan.

Former TOPGUN pilot Chris Severson recognises this set-up and ex-SAS member Ken Hames would have followed similar protocols. However, Barclays’ Greg B Davies highlights that most investors don’t have an overall plan, let alone such a watertight process.

“What most investors want is to grow their wealth – the assets they have to deploy – over the long-term,” says Davies. “But what most investors fail to do is sit down and think about what needs to be done in order to do that – the planning.”

He continues by describing how most investors make decisions based on short-term goals: to gain the emotional comfort to get through the next day or week. Instead of making informed, well thought-out decisions based on a plan, or contingency plan, they end up making decisions under stress and from scratch, in the heat of the moment.

There’s a lesson for the investment world here. Plan not only how you intend to grow your investments, but also how you will react when reality takes an unexpected turn.

It’s important to appreciate though that, no matter what approach you take to investing, you can still lose as investments can fall in value.