Planner’s Corner: Navigating Uncertainty

Recently we’ve seen an increase in volatility in the stock markets. Dominating the news is tariffs, elections, the threat of stagflation - high inflation, stagnant economic growth, and elevated unemployment, wars, etc. These are real things, so what do we do as long-term investors? A tried-and-true approach is to stay the course during times of volatility. Below is an edited version of Spring 2018 Planner’s Corner: Travel, Traffic & Construction Zones when Canada was in the process of renegotiating the North American Free Trade agreement (NAFTA).

Travel

Planning your financial future is like planning a trip. Suppose you decide to drive across Canada to Charlottetown. You could just get in the car and start driving east and eventually end up in Charlottetown. However, if you use Google maps, you will likely get there quicker and maybe even enjoy yourself. The same principle applies to your financial destination. A good financial map should get you there faster with less stress and a greater probability of achieving your life-planning goals.

Traffic

Sticking to your financial plan is like driving during rush hour. Many of us have gotten stuck in traffic. You’re in the right lane at a complete stop and it seems like the left lane is moving briskly. Your inclination is to switch lanes but the moment we get there, the lane stops and the one we were in starts moving. By picking a lane and sticking with it, you will likely get to your destination with very little difference in time and a lot less stress. In addition, just like in traffic, if there is an accident or the lane ends, you will need to switch lanes. In investing this would involve reviewing your plans and rebalancing your portfolio at regular intervals. Aside from that, you should resist the temptation to switch.

Construction Zones

Road trips can often take you through construction zones and detours. You will need to endure stop and go traffic and drive on roads full of holes and gravel. Experienced road trippers have left room in their plans to wait out the stops and learn to endure the bumpy roads (seem like Springtime in Edmonton) knowing they will eventually end. Inexperienced road-trippers may get frustrated and, trying to avoid the construction, leave the road to try out back roads that lead them off track and get lost. Investing is like road-tripping – to get where you want to go you need to drive through some construction zones and persevere through some volatility.

*The concepts for this Planner’s Corner were borrowed from an article I read about 25 years ago by Dan Richards, a well-known financial services speaker and writer.