The Confidence to Invest Wisely
Embarking on a financial plan is like sailing around the world. The voyage won’t always go to plan,
and there’ll be rough seas. But the odds of reaching your destination increase greatly if you are
prepared, flexible, patient, and well-advised.
A mistake many inexperienced sailors make is not
having a plan at all. They embark without a clear sense
of their destination. And once they do decide, they
often find themselves lost at sea in the wrong boat
with inadequate provisions.
Likewise, in planning an investment journey, you need
to decide on your goal. A first step might be to consider
whether the goal is realistic and achievable. For instance,
while you may long to retire in the south of France, you
may not be prepared to sacrifice your needs today to
satisfy that distant desire.
Once you are set on a realistic destination, you need
to ensure you have the right portfolio to get you there.
Have you planned for multiple contingencies? What
degree of “bad weather” can your plan withstand
along the way?
Key to a successful voyage is a good navigator. A trusted
advisor is like that, regularly taking coordinates and
making adjustments, if necessary. If your circumstances
change, the advisor may suggest you replot your course.
As with the weather at sea, markets can be unpredictable.
A sudden squall can whip up waves of volatility, tides
can shift, and strong currents can threaten to blow you
off course. Like a seasoned sailor, an experienced advisor
will work with the conditions.
Once the storm passes, you can pick up speed again.
Just as a sturdy vessel will help you withstand most
conditions at sea, a well-diversified portfolio can act
as a bulwark against the sometimes tempestuous
conditions in markets.
Circumnavigating the globe is not exciting every day.
Patience is required with local customs and paperwork
as you pull into different ports. Likewise, a lack of
attention to costs and taxes is the enemy of many
a long-term financial plan.
Distractions can also send investors, like sailors, off
course. In the face of “hot” investment trends, it takes
discipline not to veer from your chosen plan. Like the
sirens of Greek mythology, media pundits can also be
diverting, tempting you to change tack and act on
news that is already priced in to markets.
Sailing with the Tides
A lack of flexibility is another impediment to a successful
investment journey. If it doesn’t look as though you’ll
make your destination in time, you may have to extend
your voyage, take a different route to get there, or even
moderate your goal.
The important point is that you become comfortable
with the idea that uncertainty is inherent to the
investment journey, just as it is with any sea voyage.
That is why preparation and planning are so critical.
While you can’t control every outcome, you can be
prepared for the range of possibilities and understand
that you have clear choices if things don’t go
according to plan.
If you can’t live with the volatility, you can change your
plan. If the goal looks unachievable, you can lower
your sights. If it doesn’t look as if you’ll arrive on time,
you can extend your journey.
Of course, not everyone’s journey is the same. Neither
is everyone’s destination. We take different routes to
different places, and we meet a range of challenges
and opportunities along the way.
But for all of us, it’s critical that we are prepared for our
journeys in the right vessel, keep our destinations in
mind, stick with the plans, and have a trusted navigator
to chart our courses and keep us on target.J
Jim Parker, Vice President
DFA Australia Limited, a subsidiary of Dimensional Fund Advisors LP