“Stick to your investment plan but be prepared to make adjustments.” Advice like this is usually presented as a nuanced version of the familiar advice to stick to your investment plan. I see it as simply self-contradictory.
Advising people to be prepared to adjust an investment plan is not difficult to sell. Sticking blindly to a plan is good advice for most investors, but a sophisticated person like you can do better by being prepared to make subtle course corrections when necessary. I hope your BS meter registered something with that last sentence.
By “sticking to an investment plan” we usually mean adhering to particular asset allocation percentages and saving some percentage of income regularly. “Making adjustments” usually means changing your asset allocation percentages. You can’t make changes and stick to your plan all at once. It’s one or the other.
Sometimes changing your investment plan really does make sense if the underlying assumptions of the plan are no longer true. For example, if one of your funds changes its focus from an index of large-cap stocks to trading in jumping bean futures it definitely makes sense to find another fund. Another good time to make a change is when you wake up to the fact that you’re paying 3% of your assets each year in fees.
However, if you decide to make adjustments to your plan because of market conditions and your conviction that some asset class is destined to move in a particular direction, you are not just adjusting your investment plan – you are changing it, at least temporarily.
Just like any active investor, if you tinker with your plan regularly, you should keep track of how these hunches work out. Write down the change and sometime in the future work out whether the change caused you to make or lose money compared to the strategy of sticking with the original plan.
If you’re like most investors, a lifetime of tinkering will add up to losing money compared to sticking with a plan. However, if you don’t actually check, it’s easy to hallucinate that your guesses have worked well. I’d rather have more money than have a false good feeling about my financial clairvoyance skills.