Contingency Plan

You might have personal budget or financial plan.  You might also follow your plan closely.  However, do you ever realize that, most of the time, the result might not follow according to plan.  This is because the return of your investment might not according to your plan.  You are expecting your share investment to give you an annual return 20% but it gives you -10% due to unexpected market downturn.



Yes, market is very uncertain and nobody can precisely predict it.  But this does not mean you should give up easily.  You must regularly review your portfolio performance against your plan.  You need to review your plan if your portfolio is not performing up to your expectation.  It is especially importantly to have an contingency plan in case of any unexpected market turmoil.  This require continual learning and practice.

For example, from experience, you might learn how to detect a signal or two that share market is going to crash.  If you are a short term investor, you contingency plan might be to cash your position now.  But if you are a long term investor, market crashes may be is what you have been waiting for and you are ready for it.

Therefore, a good contingency plan is able to cater any kind of market scenario.  It creates a peaceful mind that you will know what to do rather than following herd.  Therefore a good financial plan with a good contingency plan will further enhance your route to financial freedom.