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Designing a Flight Path for Investing

Designing a Flight Path for Investing

| June 17, 2018

On any given day approximately 8 million people hop aboard an airplane to a predetermined destination. There're two types of passengers. Those that enjoy the excitement of the adventure. Then there's the unfortunate bunch that must do a series of breathing techniques to step foot on the plane. I won't bore you with the details of their rituals once they take their seat, but let me say this they leave college students in the dust when it comes to drinking alcohol on the plane.

When I was a kid, our family lived in Australia. We used to make the flight back and forth to the United States quite often. It was fascinating to experience the marvels of traveling by plane. There were many different routes we could take to make the trip. It was not uncommon to make a stop in New Zealand, Hawaii, or one of several different spots along the way. There were certain factors that determined which flight to book. Timeframe, cost, efficiency and the least disruptive path were all considered. I should clarify, my parents took these things into consideration. My only concern was if I got a window seat. Also, what snacks were available.

The path we followed took us across the Pacific Ocean. Anyone familiar with this route can attest to its bumpiness at times. I've seen even the most seasoned air travelers display a hint of anxiety. The pilots would follow their instruments in the cockpit and attempt to follow the original flight path. They had a predetermined plan which they did not want to deviate from unless it was necessary. Yet, they would make slight adjustments as needed. This could include deciding whether to pass through a storm or completely avoid it. I remember the plane shifting course, changing altitude and the seatbelt light illuminating quite often.

Investing and planning for our retirement can feel quite similar. Historically, the stock market has gone higher over the long term. Although, along the way there're going to be dips. From time to time there'll be those highly turbulent and drastic altitude changes. Such periods in time we know as bear markets. Our goal is to stay safe during the mild turbulence. But, completely alter our course as those severe altitude changes are occurring.

Investors tend to have similar goals. We are all looking for a return on our investment. The difference being our timeframe. This is important because what works for one investor may not work for another. It may also not be suitable. Some have been on this journey for years. They're approaching their retirement distribution phase and have no desire to experience such volatility. Others are beginning what they hope to be a long and prosperous phase of accumulating wealth. Realize there will be bumps, changes in course and possible layovers along the way. It will not be a straight line from beginning to end. Our goal is to plan and account for these possibilities.

Pilots rely on many flying instruments to navigate the skies. They also get information from other pilots and use past scenarios to help in future events. This makes the flight as smooth and comfortable as possible. Our philosophy in investing can be quite similar. There're many tools we can use. Technical indicators, fundamental data, quantitative data and macro-economic views are all helpful. These indicators can help us reach our desired destination with as few bumps and bruises as possible. We can't avoid every bump, but we can attempt to navigate the severe downturns.

The market volatility of 2018 has many investors on edge. To avoid deviating off course, we follow our predetermined rules and closely watch for any sign of change. I would compare the first half of 2018 to that of flying through turbulent skies. It's not the most enjoyable, but so far, we have remained on course. As the captain of the airplane might say, "you can move about the cabin, but please do so with caution." If we could help you with your financial flight plan, please click here.