I’ve been watching people drive all my life. I’ve been an individual investor and an investment advisor guiding clients for more than half of my adult life. I’m a curious soul and during a recent trip from Syracuse to Atlanta, I had quite a bit of time to watch and observe the behaviors of all sorts of motorists and their driving habits. I could not help but draw comparisons between peoples’ driving habits and their investing habits; impatient drivers expose themselves to all sorts of unnecessary risk and stress.
On a long trip, my GPS estimates the time I will arrive at my destination, usually within a few minutes. As advisors, we tell clients what they should expect in terms of average market returns knowing that, in any one year, those returns could be considerably higher than expected (2017) or perhaps lower than expected (2018). Over your investing lifetime, you will likely achieve what you set out to accomplish in terms of investment results if you stay the course and remain committed. Your GPS will do the same; despite the fact that you may be driving faster or slower than expected at certain times along the way, you will generally arrive on time.
While not always the case in Syracuse, in Atlanta, traffic jams are ever-present during the rush hours. Undeniably, some drivers feel the need to constantly change lanes expecting something better to happen. Rather, I conclude, the best option is to stay in one lane and let the “jam” naturally work itself out – no different than what long-term investors should do in an efficiently functioning market. We have all observed motorists who change lanes whenever they suspect that other drivers may be getting an advantage. Just as there is added risk in changing lanes and avoiding bumpers and accidents with other moving vehicles, there is risk in jumping from one investment to another based on news reports or a gut-feeling that you are not moving forward fast enough.
The next time you are in a traffic jam, observe the experienced drivers who do in fact stay in their lane – they have been there before, they have seen it play out and they know the stress and risk is not worth the potential reward. Although they may be frustrated, they tend to remain calm and logical at the same time – accepting the inevitability of certain occurrences.
The best drivers I have observed in my lifetime have a high degree of patience. And you guessed it, the most proficient investors are very patient as well. Successful investors understand that some years will be better than others. Poor economic cycles or market corrections (although fairly common and expected) are impossible to predict in terms of veracity or duration. This is a valuable lesson I have learned over the last twenty plus years as an investment advisor. If you feel the need to change lanes, end your investment journey, or simply seek assurance that you’re headed in the right direction, be sure to reach out to your Rockbridge advisor!