WORK-OPTIONAL LIFE
WINTER 2 0 1 8 / 2 0 1 9
FINANCIAL MARKETS can be volatile,
amidst geopolitical trade wars, interest
rate hikes, and global financial events.
When seas get rough, should investors
jump ship? Before taking action,
recognize that market volatility is normal
along the path towards growth.
How can we, as investors working
towards or already in retirement,
maintain discipline through up and
down markets, political uncertainty,
economic instability, or whatever crisis
du jour threatens progress towards our
investment goals?
Years ago, I was learning how to sail a
boat in the Vancouver coastal waters.
My instructor took three of us sailing
students across the Georgia Strait—when
clouds rolled in and suddenly, the weather
shifted, and the water became very
choppy and uneasy.
As an unseasoned sailor, I felt scared,
isolated, and disoriented in our small
boat as we were tossed side to side by a
seemingly unpredictable battery of waves.
Yet, my instructor remained calm—he
was experienced and prepared with a plan
for how to react in a situation just like
this, and he successfully navigated and
led us to calm waters.
Investing can be a lot like embarking on
a sailing trip across the open sea. The
voyage may not always go as planned,
and there’ll be rough waters. But the
odds of reaching your destination
increase if you are prepared, flexible,
patient, and well-advised.
The key to a successful sailing voyage
is having a good navigator. This is
where having a trusted strategic advisor
is so important. A skilled and trusted
advisor is like my sailing instructor/
navigator—regularly taking coordinates
and making adjustments, if necessary. If
your circumstances change, your advisor
may help replot your course. 1
UNCERTAINTY
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. But like a seasoned
sailor, an experienced advisor can work
with the conditions to adjust and adapt.
Trimming back some “market risk”
exposures and shifting further towards
a higher quality and value focus in the
portfolios is a strategy advisors may use
to adjust and adapt during volatile market
conditions. These actions can create more
stability in investment portfolios and help
clients find calm amidst the storms.
DIVERSIFICATION
Once the storm passes, you can pick
up speed again. Just as a sturdy vessel
can help you withstand most conditions
One of the five Ps in my book, Smart
Risk, is “Plan”. Like when planning a
sailing trip, when planning an investment
journey, you need to decide on your goal
that is realistic and achievable. Then,
ensure your portfolio is aligned with
the right strategy and asset mix
to get you to that goal. What
degree of “bad weather” can
your plan withstand along the
way?
1 Source: Smart Risk Magazine Issue no.1, “Rethinking the Role of an Investment Advisor”.
7
at sea, a well-diversified portfolio can
act as a ballast against the sometimes
tempestuous conditions in markets.
AVOID DISTRACTIONS
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. Media
pundits and scary news headlines can
also create distracting noise, tempting
you to change tack and act on fear or
news that may already be priced into
markets.
THE BOTTOM LINE
Preparation and planning are critical
towards getting investors comfortable
with the idea that uncertainty is inherent
to the investment journey, just as it is
with any sea voyage. While you can’t
control the outcome, you can be prepared
for the range of possibilities in the right
diversified “portfolio vessel”, keeping
your destinations in mind, sticking with
the plan, and trusting your navigator to
chart the course and keep you on target
to achieve and maintain your Work-
Optional Life.