Rules Beat Forecasts

"The investor's chief problem — and even his worst enemy — is likely to be himself." — Benjamin Graham

Endowments do not beat the market by predicting it. They win by writing down a sensible policy and sticking to it: a target mix of assets, a schedule for rebalancing, and a spending rule — all decided in calm conditions and followed when conditions are anything but.

This matters because the costly retirement mistakes are rarely analytical; they are behavioural. Selling after a fall, piling in after a rally, abandoning the plan because of a headline. A simple written policy is the antidote. When markets lurch, you are not forecasting — you are following a rule you already agreed with yourself.

A personal version fits on one page: your target asset mix, when you will rebalance back to it, how much you will draw each year, your contribution plan, and a fixed date to review. Nothing about interest-rate predictions or market calls.

Illustrative example: a one-page policy

The discipline is the edge. Rebalancing mechanically makes you sell what has run up and buy what has lagged — the opposite of what fear and greed urge. Over time the rule-follower tends to beat the forecaster, not because the rules are clever, but because they are kept.

Write the policy once. Let it make the decisions when you would otherwise make them badly.