Pfersching establishes annual portfolio review as delicate balance between obsessive daily tinkering causing emotional short-sighted decisions and infrequent monitoring risking significant uncorrected drift, prescribing comprehensive once-yearly examination anchored to calendar milestone (year-end, birthday, first investment anniversary). The four-objective protocol prioritizes life-first assessment: reaffirming destination by revisiting Chapter 1 goals amid life circumstance changes (marriage, children, career) ensuring investment strategy serves life rather than vice versa, checking fleet formation through rebalancing discipline correcting asset allocation drift (example: 60/40 target drifting to 68/32 requiring strategic correction), evaluating performance against appropriate benchmarks rather than absolute returns (positioning -5% as stellar during -15% market versus disappointing 15% during 25% market), and assessing fuel line capacity for contribution rate increases leveraging income growth or expense elimination for compounding impact. Critical warning against performance-chasing tactical mistakes abandoning diversification based on short-term cyclical results, positioning annual review as strategic oversight elevating investors from sailors to admirals conducting high-level naval operations.

Chapter 18: The Annual Strategic Review Protocol

Warren Pfersching