Why your financial plan needs a full squad, not just a star player

The World Cup always gets people talking about the match winners, the player who can change a game in a moment. But winning sides usually rely on something less glamorous and far more important: balance, structure and a plan that still works when the pressure arrives. Financial planning is much the same.

Every four years, the same debate comes round again. Who is the best player in the world? Who carries their country? Who turns up when it matters?

Football makes it easy to fall in love with the idea of one brilliant individual changing everything, and sometimes they do. But the teams that go deepest in major tournaments are rarely built on one player alone. Brazil in 1970 had Pelé, but also Jairzinho, Spain’s great side from 2008 to 2012 was packed with talent, yet what really set them apart was the system, everyone knew their role, and the whole team moved as one.

Individual quality matters of course. It just tends to matter most when it sits inside a structure that supports it.

Markets reward those who stay in the game

It is worth saying this plainly, over long periods, markets have rewarded people who stay patient and remain invested. The S&P 500 has delivered an average annual total return of around 10% since inception. Even in the five years from 2019 to 2024, a period that included a pandemic, war in Europe and the sharpest rise in interest rates for a generation, it averaged more than 13% a year.1

Pensions are still one of the strongest ways for UK savers to build wealth. Tax relief of up to 45% on contributions, alongside decades of potential compound growth, means pension money can start working hard from day one. The bigger question is not usually whether investing makes sense. It is how to do it in a way that can survive different markets, different tax years and different stages of life.

The risk of relying on one star

Problems tend to appear when everything depends on one idea. That is understandable, especially when the recent numbers look persuasive. The S&P 500 returned 31.5% in 2019, 18.4% in 2020 and 28.7% in 2021.1 For anyone watching from the sidelines, the urge to put more and more behind the same trade was easy to understand.

Then came 2022. The S&P 500 fell 18.1%.1 Bonds, which are often used to steady a portfolio, fell too. The global bond index dropped 16% in 2022, its worst calendar year since the index began in 1990 and more than three times worse than any previous annual fall on record.2 For many investors, it was a blunt reminder that even sensible assumptions can break down when conditions change.

The lesson is not that equities are bad, or that bonds no longer have a role. They do. The point is simple: if the whole plan rests on one outcome, there is very little cover when that outcome does not arrive.

Rely on a squad, not on a superstar

The best international managers are not just picking the most talented eleven players. They are looking for balance. Who protects the defence? Who can change the tempo? Who gives the team control when it is ahead, and who gives it options when it is chasing the game?

A good financial plan asks similar questions. Cash, pensions, investments and property can all have a place. The right answer is rarely “pick one and ignore the rest”. It depends on your goals, timeframe, tax position, income needs and appetite for risk.

A pension can offer valuable tax relief. Investments outside a pension can provide flexibility. Cash gives you breathing room when markets are unsettled or life becomes expensive. Property can be useful too, although it brings concentration risk, costs and practical complications. None of these is perfect on its own. Used together, they can create something much more resilient.

Do not only play the group stage – there is a bigger picture

There is a familiar World Cup mistake: a team can focus so hard on topping the group that it loses sight of the tougher path that may follow. A short-term win can quietly set up a harder route later.

Financial planning has its own version of that. Chasing this year’s best return can look clever in the moment, but it may not help much if it leaves you exposed later. Pension contribution windows, tax allowances and compounding all reward early, consistent action. Once a tax year has passed, some opportunities are simply gone.

Tactics change. Principles last.

Football moves on. The old 4 4 2 gave way to 4 3 3, then to pressing systems, inverted full backs and midfields that change shape in and out of possession. The best managers are not loyal to one formation for the sake of it. They understand the principles that matter: structure, control, flexibility and the ability to adapt.

Markets move on as well. The assets that led the last decade may not lead the next one. But the principles of patient investing, sensible diversification, careful tax planning and matching the plan to real life goals tend to hold up. The aim is not to predict the next winner with perfect accuracy. It is to build a plan that does not depend on being right every time.

References

1. S&P 500 total returns, including reinvested dividends: 2019 31.49%, 2020 18.40%, 2021 28.71%, 2022 −18.11%. Source: YCharts / Standard & Poor’s.

2. Bloomberg Global Aggregate Treasuries Index, calendar year 2022. Source: J.P. Morgan Asset Management, Guide to the Markets UK.