Weathering the Storm

“We can’t direct the wind, but we can adjust our sails”—Thomas S. Monson

Uncertainty creates fear. And right now, there is lots of uncertainty in the world. We’re seeing uncertainty in the Middle East, and that is creating fear in the market. When we see rising inflation that continues to rise month after month, that creates uncertainty, which will lead to fear. Fear is a natural and expected reaction to the uncertainty stemming from these macropolitical and economic events.

Similarities can be found in the unlikeliest places, which is why I picked this quote from Thomas Monson about sailing, because money management and sailing, while not appearing to have all that much in common, have some striking similarities.

If there is just one lesson sailing can always teach you, it is that Mother Nature can not be controlled. It cannot be predicted. One cannot outrun it. One cannot beat it. One must adjust to it, as Thomas notes. You can’t change which way the wind blows or how hard it blows. Ships, however, have sails, and we can adjust those. In sea storms, the same applies. You outrun it as it approaches. You have to make the necessary adjustments to weather it as best you can.

The same applies to money management and financial planning. The stock market is its own beast. It reacts to outside news in different ways, sometimes predictably, other times, not so much. The situation in Afghanistan and regarding inflation has created large amounts of uncertainty that has led to fear, and this fear rippled some waves in the stock market.

One of the ways we adjust sails when it comes to uncertainty is risk management, not just with insurance tools like life, home, auto, or long-term care insurance, but with asset allocation and using our income-focused investment philosophy. Instead of letting cash sit idly on the sidelines while we, as investors try to guess the winds of the market, we focus on income-generating securities that allow clients to build up a cash position so that when the time to reinvest manifests itself, the portfolio is ready.

As sailors do with wind and Mother Nature, we cannot control where the stock market will go, whether up or down. However, we can adjust the sails, and consistently do so to best prepare our clients for whatever obstacle approaches. The key is never to sell out one way or another in predicting the market. That is folly. The better approach, as sailing teaches us, is to continually make adjustments so that whether we hit small breezes or large storms, our clients are prepared to endure them.