All of a sudden, conservative investors increased their risk tolerance only to compound the problem as 2018 began with a 7% rally, then lost 10% in what felt like overnight, the rallied back to a new all-time high in September, and then retreated to bear market territory by December.

Now investors are rethinking their risk tolerance for the third time in three years. Is this because they are not smart people? Not. At. All.

I would argue that it’s because they don’t have a Get Back Coach who ensures their strategy doesn’t deviate from their game plan.

In business I’ve learned that even though you can do the hard things right, it doesn’t matter if you can’t do the small things right too. Sean McVay understands this well. It doesn’t matter how good of a coach he is if he walks into the referee and gets a penalty. As simple as that sounds, it’s obviously hard for him to do on his own. Investors should think the same way.

It doesn’t matter how good a portfolios asset allocation is if the manager accidentally penalizes the returns in a way that is avoidable.

An investor’s Get Back Coach doesn’t exclusively have to be a person; it can be a financial plan, a predetermined risk appetite, a systematic approach to investing, an ongoing pursuit of self-development, or all of the above. For Sean McVay, he studied the tapes, learned from his mistakes, and hired someone to make sure he quite literally keeps in line. That’s what Annie Duke would consider quality decision making. Who’s your Get Back Coach?

Nyle Bayer, follow me on Twitter @nylebayer

This article was written by Nyle Bayer of Helios Quantitative Research, a participant in the ETF Strategist Channel.

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