Has investing become an extreme sport?

View fullsize

This past weekend my family decided to be a part of a team building event at Extreme Water Sports in Oklahoma City, OK. This is a U.S Olympic and Paralympic training site that allows regular individuals to partake in many adrenaline inducing activities. Whitewater rafting, by far is the most exciting and dangerous activity offered at this facility. I avoid risk by nature and wasn’t exactly sure what I was getting into but figured I could handle it. I was not prepared for what happened next.

After listening to a short and totally inadequate safety speech by our guide, we headed out to conquer the rapids. As the roar of the rapids filled our ears our guide yelled, “We’ll go through this course three times. Do you want to go aggressive now or later?!” The six of us in the raft chose later. At the first spillway I realized I had made a big mistake. The waves smashed into my face as our guide yelled, “Row forward!”

As I thought, “Ok, that wasn’t so bad,” we hit the next rapid and I found myself ejected out of the raft and into the swirling rapid along with two others from our group. I was dunked repeatedly, and terror engulfed me as I was pulled under the raft by the raging current. I could not remember a thing from the prior safety instructions. Needless to say, I was saved and was unscathed, except for a few scrapes, bruises, and drinking gallons of river water. I am forever in the debt of our guide!

As I was reflecting on my “near death” experience I realized that as investors there are many parallels between white water rafting and what we have experienced over the past year or so. Our guide gave me some really good advice, however, in the moment I forgot it all. Here’s what he said…

“YOU HAVE TO THINK LOGICALLY!” - If you have to rescue someone that has been thrown out of the raft, you must grab them by the shoulder straps of their life jacket and dunk them under the water to get buoyancy and momentum needed to drag them into the raft.

When I was in the water I wasn’t thinking logically, I was in survival mode. I would have fought against someone trying to dunk me to pull me in the raft. The same applies to investing, when the market has dropped drastically all the investor thinks about is survival and your survival instincts scream, “Get out! You can’t recover from this! At least you won’t lose any more!” This is where retirement plans capsize and never recover. Sticking to a plan when you are going through the volatility of the market is a must if you are to make it out. Benjamin Graham summed up this sentiment best when he said, “The investor’s chief problem - and even his worst enemy - is likely himself.”

“LISTEN TO YOUR GUIDE AT ALL TIMES.” - Whether I was in the water or in the raft, it was the precise and timely instruction of the guide that got me through any situation that I was encountering. If I could hear his voice over the roar of the rapids, I was ok. Trust me, he received a big tip at the end because I felt that I owed him my life!

There is a reason you hire an advisor. It’s not for the good times, nor is it only for the bull markets; a real advisor proves his worth when the going gets rough and things get crazy. This is because he knows that he is handling your future livelihood. As long as you are able to hear your financial advisor’s voice, allow him to shred the narrative and follow his promptings. If you can do this, you will be ok. Don’t jump ship, hang in there. This is what he was trained to do. You were smart to hire your advisor so trust yourself, listen to your financial professional because they are there to help you succeed. Your financial advisor will celebrate your financial successes because when you succeed, they too are successful.

“SOMETIMES ALL YOU CAN DO IS HUNKER DOWN” - There were times our guide would yell, “GET DOWN!” This meant to lock your feet in, hunker down, and hold on because we were about to hit a massive rock or rapid. He was diligent in watching out for what we were approaching, and his verbal commands were an indication of his concern for our safety. Most importantly, he knew that in that moment, we were safest in the vessel and by not jumping ship.

There are times when the best course of action is hunkering down. No one knows the exact future of the markets, the economy, or what the results of the elections will be. Choosing a financial advisor is like selecting a long-term whitewater rafting guide, but more personal because you are selecting an individual to build an intimate relationship with based upon your future financial needs and/or goals. You have to trust that your advisor will guide you through the process of putting together a strategy that will be ready for such a time as this. You also have to trust that you have been properly allocated and diversified before any indications of a market decline. Through carefully selected and diversified investments, your advisor will guide you through hunkering down and holding on for the ride. You’ll pray it ends sooner rather than later, but if you listen to your financial advisor, you’ll be able to hold on and come out safely on the other side.

Daran Tucker, ChFC
LPL Investment Advisor Representative
www.f-p-r.com