Some wars never end.  One battle just follows another.  That is the world of the investor, who is in a never-ending battle to manage risk and protect his or her portfolio.  Like all battles, there is fog everywhere, which makes it difficult to see reality.  There is the sudden eruption of loud things requiring immediate attention . . . but sometimes not.  There is always the threat of an incoming surprise mortar round from unexpected sources.   There are things that smell really, really bad.  And, there is the grinding fear of an ambush . . . or being out-flanked . . . or even over-powered.  It is easy to get “trigger-happy” and just start shooting.  In your gut, the urge to vomit and/or panic just waits for the right over-whelming moment of surprise.

Currently, investors are fighting the battle of Europe, which has already lasted two years.  Investors are tired and battle-weary.  They live in fear of each new headline out of Europe.  They are always listening for a rumor, any rumor, true or not.  They get ambushed by legal and political arrangements they are unfamiliar with.  They live minute-to-minute, waiting for an incoming round of destruction.  When they get ambushed by a surprisingly poor U.S. jobs report, for example, they get “trigger happy” and start selling.  The urge to vomit and/or panic starts to rise.

But, the odds of winning any battle are greatly improved by having a battle plan beforehand.  You know the first objective is to live to fight another day, while still taking the bridge or the town or holding a ridge.  You have been briefed on the enemy and their techniques.  You have planned for them.  You know to expect changes on the battlefield.  You adjust for them on-the-spot but stick with the battle plan.

For investors, you know your objective is to protect your portfolio for the long-run.  You know there will be changes that you must adjust for — by increasing cash or reducing exposure to some sector of the economy or whatever — but you stick with your battle plan . . . even when the urge to vomit and/or panic suddenly hits you!