Summary: Execution is what most people think about when they think about investing, but it’s only part of the process. It’s important, though--as important as framing up a structure after you’ve made all your plans. When people say they’re building a structure, they usually mean they’re in the last stages—framing up the walls, or finishing out the interior. And that part of the process is really important. But it flows from the other steps. Again, there are always choices, choices, choices: joinings, fasteners—the nuts and bolts of building. When you execute a plan, there are all kinds of choices as well. What kind of brokerage to use—the cheapest one, or one that will take extra care with your order, and protect your order’s information? What kind of custody arrangements to use: a third-party custodian, or one of the manager’s choosing? And what kind of orders do you make—market orders, or do you specify a price, and run the risk of not being able to buy the stock or bond that you want? Execution can be everything. If you buy a hot stock that everyone else is jumping into at the time, there’s a pretty good chance that you’ll be disappointed, because what the wise do in the beginning, the fool does at the end. Hot securities are usually priced for perfection, and rarely deliver. But buying a falling stock or market can be like catching a falling knife: the harder you try, the worse you get hurt. But the entry price frequently turns out to be the difference between a truly profitable investment idea and a mediocre one. How you put an investment plan into action matters as much as any other step. Investing is a detail business—close-enough usually isn’t good enough. Because it’s your money, and what people do with it is always your business. Douglas R. Tengdin, CFA Chief Investment Officer Follow me on Twitter @GlobalMarketUpd
