Have you ever taken a long airline flight-4, 5, 6 hours or longer? I once flew from Sidney to LA-14 hours. You need to be into movies or a couple of Ambien to be in the air that long. Flying even short flights of less than an hour sometimes leads to bumpy air. Deep down, no matter how the plane shakes, you know the plane is safe. Somewhere deep down you remember being told that the most dangerous part of your trip will be when you drive home. It is not helpful during the gyrations. You are not thinking about facts and they are not making you feel any better as the plane bounces around.
Why am I writing about bouncy air flights during an airplane trip? Some of you are listening to or are hearing about the drop in the market in January that has continued into early February. If you read my emails from last December and early January, I stated that 2013 was a record year for returns but that sooner or later the market would go down. It turned out to be sooner. I don’t know, nor does anyone else know, if the air turbulence in the market will continue or not.
Think about the analogy of flying and the market. Sometimes airplane trips are not smooth and turn into white knuckle adventures. The market volatility can be similar. But it is not your knuckles that get white; it is you heart that palpitates and it is your desire for “flight” from the market. When flying, you can call a member of the flight crew and ask to get off but it will not work and in the end you land safely.
With respect to your portfolio, you need a coach to prevent you from making a big error and getting off the flight taking you to your destination of wealth. The real difference between the analogy between an airplane trip and your journey to establishing wealth is that in the former your feet are not on the ground and the pilot is in charge with years of experience who knows in the long term all will be OK.
Listening to the markets ups and downs on a daily/weekly/yearly basis has your feet on the ground but without a coach to keep you focused on the destination, can cause you bail to out and lose the opportunity to reach your goal i.e. the destination.
I have two presentations that I can present to you and any white knuckle investor. One is “The Sky is Falling-Not” and the other is “After the Crash”. I am not suggesting that we will have a crash but it is interesting to see what has happened after crashes of the past.
Oh yea! Past performance is no guarantee of future results. He who does not know history is destined to repeat it, and “This time it’s different” are the four most expensive words in the investing language.— Sir John Templeton.
Contact me with questions.