PRISM: Prioritizing Your Goals

Discover how the PRISM Wealth-Building Process helps investors create a personalized financial plan by setting clear goals, assessing risk, selecting suitable investments, and tracking progress. Learn a practical, flexible framework that adapts to changing life stages while supporting long-term financial success. 

In your experience, how do you apply a goal-based investing approach in practice, and has having a written investment plan helped you stay disciplined through changing markets and different life stages?  

Read More about The PRISM Wealth-Building Process: Putting It All Together and discover how a personalized, goal-based investing framework can help you build, manage, and adapt your financial plan for long-term success. 

My post to the article cited.

Charles, a few observations.

#1 Having a process is better than NOT having a process. #2 The process you chose must be systematic (repeatable), and results must be improvable (measurable) so you can learn and improve past results.

#3 The  AAII PRISM process meets the requirements for being a systematic process.

#4 If you don't choose to follow the PRISM model, then you have to find – or invent - your own process.

#5 So at least learn from the PRISM model. 

#6 AAII provides access to several dozen tools for building and managing a portfolio using the PRISM systematic process (see above).

#6 Most AAIIers are  "Do It Yourself" ("DIY") people – they enjoy making independent decisions and taking control over their financial lives.

#7 Part of being an adult means making mistakes.

#8 You can learn a lot from other AAIIers. #9 Read Robert A's comment and learn from it.

I believe I have learned more PRACTICAL information from other AAII members' comments than from AAII's THEORETICAL articles. Both helped me learn. 

#10 I estimate that many AAIIers DO USE AND LEARN FROM THE AAII PROCESS, but they learn more than they share. The only issue I have with my AAII membership is that a large percentage of AAII members don't share their experience with others. 

#11 Get used to that. It's a selfish world out there. That's how markets work. 

#12 In a famous DIY self-help book, "Where Are The Customers' Yachts?" Fred Schwed Jr. tells a story about how some new investors were admiring the beautiful yachts of rich Wall Street brokers when one asked, "Where are the customers' yachts?" 

#13 Wall Street is not in the business of making YOU money; it's in the business of generating transactions that make THEM money. That's where the yachts come from – that and AAII DIYs who follow the steps listed above.

#14 AAII promotional literature estimates that the average net worth of an AAII member portfolio is around $2.5 million, compared to the IRS data that most Americans aged 50 have a net worth around $500,000. 

#15 As I said, pay attention to what other AAII members write. Most participants who comment want to help you learn. Some just want to brag. You'll figure that out soon enough.

#16 That's part of the PRISM "improvement process" step. #17 If you don't have an "improvement process" step, I recommend W. Edwards Deming's (Plan-Do-Check-Act) improvement process. He was best known as the "Father of the Quality Improvement" for his pioneering theories on management, continuous improvement, and statistical quality control. The Deming Cycle is an iterative 4-step management method (Plan-Do-Check-Act or PDCA) used in many businesses for the control and continuous improvement of processes and products, and his "System of Profound Knowledge," a holistic framework that combines systems thinking, understanding and controlling of variation (using PDCA), and the theory of knowledge and psychology. 

#18 Having yachts is overrated. Having a $2.5 million portfolio by age 50 is not.

Barry, thank you for the honorable mention! I will present your #9 here for easier reference:

I guess this system can provide a framework for some people, but I see it as totally unnecessary and even counterproductive if the objective is to optimize one's asset growth over a lifetime. Step 2 in particular is full of conventional wisdom that I, in my humble opinion, regard as dead wrong. It actually encourages young investors to fear their biggest friend--volatility. Instead, it should teach young investors to overcome IRRATIONAL fears (such as the fear of volatility). PRISM also overcomplicates what can (and to my mind, should be) a relatively simple process.

For what it's worth, my general and fairly simple method of financial growth has been as follows: work, save, and invest. The work part is also pretty simple. Stay employed doing SOMETHING, even if you temporarily have to take a job (or more than one job) that is "beneath" you. You HAVE to maintain at least one source of income at all times.

Saving isn't one of the PRISM steps, but it probably ought to be. I've never set any sort of saving goals, but I have always set a somewhat flexible spending limit of "as little as possible." 

Spending has been the most systematic part of my financial activities. Since my early 20s, I have recorded every penny of every expense I incurred. If I want something bad enough to spend money on it, I can take the time to record the expenditure in one of my ledgers. Then I can look back to see where my money has gone and what I can do in the future to plug any leaks.

I am frugal by nature, so spending below my means was never a problem. Thus, the save element took care of itself. 

To me, the investing element is as much an art as a science. I have never had an investing goal. I have maintained an investing focus, which is not a goal because it is not measurable. That focus has always been to grow my net assets in perpetuity as efficiently as possible. To that end, I have generally employed a buy-and-hold, 100% equities methodology. I don't have a lot of hard and fast investing rules; to me, the exercise of judgment informed by experience and derived knowledge are more important than following a "system." 

One complaint I have about PRISM is that what it regards as investing goals are actually spending goals (down payment on a house, children's education, medical care, etc.). I have always believed that such expenses would be subsumed within my simple work, save, and invest methodology--and they have been. By focusing on growing wealth, the money was always there for whatever expenses came along.

I've never had a written investment plan. The only significant portfolio change I made based on "changing markets and different life stages" was to diversify by buying several equity index ETFs when I retired.

This simple methodology enabled me to retire early and continue growing my assets through almost 15 years of retirement. However, I'm NOT suggesting everyone should follow it. Each of us is different. I merely offer this as a counter to the notion that a system like PRISM is indispensable. The best method is one that comports with an individual's abilities and proclivities. You do not have to reinvent the wheel, but thinking outside the box often works better than relying blindly on what someone else has put in the box.

------------------------------
Rob Adams
------------------------------