The family was excited. We had just pulled out of our driveway on a two-week summer road trip that we'd been planning for months. The route would take us through Oregon, California, Arizona, Utah and Idaho, and back home to Vancouver, Washington. What an adventure it would be!
We had been on the road for all of five minutes when my three-year-old son Chase piped up: "It's taking too long."
Chase's expectations when we were but a few miles into our big trip made me think. Just as my young son was hoping that every moment of every mile would be tons of fun, I often encounter market participants who experience similar levels of frustration during their extended investment journey.
This is understandable. When the road ahead is a long one, it's easy to grow impatient to "arrive." To be honest, there were a few times when we were stuck in LA traffic that I felt just like Chase did.
Wouldn't it be fantastic if we plunked our money into the stock markets and it did nothing but grow, with every moment yielding a new and exciting milestone? Instead, if you invest sensibly for the long haul, you can expect to build wealth over time, like the financial equivalent of pleasant memories from a road well-traveled. But along the way, investors must also endure many, many "miles" of not much happening, interspersed with periodic detours, traffic jams and similar setbacks.
Thus, investors often experience Chase-like temptations when the markets aren't necessarily playing right along with their hopes and dreams:
- Am I really making any progress?
- What's the stock market done for me lately?
- Why am I the only one who seems to be underperforming?
- Maybe I should take a different route.
Here are some other ideas from our road trip that apply to investing:
It's a long journey; plan accordingly. For our two-week trip, it felt like we brought along enough snacks, water, kids' games, bandages and other miscellaneous supplies to last for months – just in case. We ended up using almost all of it. Likewise, the most successful investment journeys usually begin with an abundance of planning and preparation. Portfolio construction, tax management, cash-flow, insurance, estate planning and more … It may feel like overkill at the time, but you can stay miles ahead by establishing your financial "supplies" in advance.
Focus on the scenery, not the odometer. Nothing will make a physical or financial journey more agonizing than counting every mile marker or market move between you and your next goal. On the road, it's best to enjoy the view instead of fixating on the miles remaining. In your investments, keep an eye on quarterly, annual or even longer-term reports; don't get bogged down in the daily news.
Go ahead: Ask for directions. During our trip, our GPS saved us from many a setback as we planned our routes and steered around the most serious traffic jams. We were also more relaxed, knowing that help was available when needed. An informed advisor can likewise serve as your financial planning and investment management coach and guide, keeping you on course toward your desired destination, helping you avoid the big road blocks, and being there whenever questions arise.
Pace yourself. Overall, my family and I had a blast; we're going to remember our trip for years to come. That said, five people in one vehicle for thousands of miles … Well, let's just say it was essential to stop regularly for 10-15 minutes, let the kids kick around a soccer ball, take a break and breathe a little. This is a good way to approach challenging market conditions as well. If you're getting overwhelmed by negative financial news – or, conversely, tempted to race after hot runs – take a break. Spending leisure time with friends and family is not only more fun, it's likely to be more productive than speeding down the road of life. Besides, the markets will still be there when you get back.
I hope your own summer is filled with adventure. Enjoy!