We are halfway through the summer as I write this, and when I'm not meeting with you all, it seems that parenthood has me at the pool as often as not. As I see my kids jump off the diving board, I'm reminded of those first trepidatious steps up to the board, walking out to the edge of the plank, and thinking “it's waaay higher from up here than it looked from down there.”
Do you remember it this way too? And I don't recall it mattering which board - high dive or low dive - it's always farther down to the water when you're looking at it that way. But then you jump, turn around and look up after you resurface, and sure enough, that stupid board is the same mediocre height it's always been even though it just felt like jumping off the edge of a cruise ship. No matter how towering it looked in the moment, it was the same height it's been since the Reagan administration when your town's parks and rec department installed it.
Distance from board to splashdown isn't the only thing that seems larger than life in the moment. So does investment risk. And it doesn't seem to matter if you're looking from the high dive as an aggressive investor, or from the low dive as a moderate investor, or even conservatively, like the two foot plank in my aunt's backyard pool. The risk you take on in the moment you stare it dead in the face nearly always appears larger than life.
I'll give you an example: Pick a number between 5 and 15. Got it? OK, if you picked 12, can you remember what the talking heads on your favorite news channel were obsessing about 12 weeks ago? How about 12 months ago? Now, if you don't know, go look it up. If you do know, looking back, were those alarming concerns back then alarming enough to change when you planned to retire? Did they change how much you wanted to sell your practice or that real estate for? Did they change how much you thought you could sell your practice or real estate for? Did they threaten your income streams? Better question, have they affected your income streams since the talking heads started yelling at you about these concerns so many weeks ago?
In all likelihood, no, no, no, no and no.
You're not wrong to be concerned, any more than my 5 year old is wrong to get shaky knees looking down at the water her first time jumping off the diving board. Belly flops are real. Just the other day, I tried to go back to teenage years and do a backflip off the diving board. I was so successful as a matter of fact, that I over-rotated and did a back flop. But everyone you see doing spectacular things off of the diving board has had their share of mishaps. The same is true of successful investors. On the road to positive outcomes, occasional pain is practically guaranteed.
Some of the things the talking heads on the news yell at you about are real. Like Russia trying to take over a neighboring country and upending global peace and commerce in its wake. Or like COVID policies having a spillover effect of tightening the labor market and making hiring the most challenging it's ever been in your career as an entrepreneur.
But another risk is the stuff no one pays attention to. My daughter is more likely to get hurt running on wet concrete around the pool than she is to do a belly flop from the low dive. And you're just as likely to get hurt from the Fed printing trillions of dollars and injecting it into your economy, putting inflation on an inevitable fast track. So by all means, pay attention to risk. Hedge for it. Mitigate it. Don't take the high dive risk when low dive risk will get you where you need to be. But as scary as it can be in the moment, don't forget to look back on risks you've taken the past and take note of how monumental they were.
Or were not.
Any opinions are those of Tim Weddle, Financial Advisor, and not necessarily those of Raymond James. Any information is not a complete summary or statement of all available data necessary for making a decision and does not constitute a recommendation. Past performance may not be indicative of future results. Investing involves risk and you may incur a profit or loss regardless of the strategy selected. Contributions to a Roth IRA are never tax deductible, but if certain conditions are met, distributions will be completely income tax free. The cost and availability of life insurance depend on factors such as age, health and the type and amount of insurance purchased. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications. Guarantees are based on the claims paying ability of the insurance company. Prior to making an investment decision, please consult with your financial advisor about your individual situation.