Navigating Stormy Seas



Daniel Sitar

Financial Advisor and Portfolio Manager


My father has been a passionate sailor for most of his life. In his twenties, he sailed from Victoria to Maui and in recent years, he has competed in several long-distance races.

While I do not possess quite the same level of enthusiasm for sailing as he does, I try to join him on the water a few times a year. On our most recent excursion, I noticed a number of important similarities between sailing and investing.

Before setting out on the water, one must have a good sense of:

1. Their current location

2. Where they want to get to (the destination)

3. A general idea of the route they want to take to get there

We must also keep these three points in mind as they relate to our wealth. It can be challenging to obtain an accurate perspective of your current financial position. Furthermore, financial goals can be difficult to determine, and the path to achieving these objectives is frequently unclear. A well-organized financial plan can be immensely helpful when it comes to outlining where you are today, where you want to end up and what the optimal route is to get you there. Without a good understanding of these variables, a successful journey becomes more difficult.

Sometimes, the conditions on the water are perfect. The seas are calm, and the wind is blowing at a pleasant speed from an ideal direction. Progress toward the destination is occurring faster than anticipated. In the investing world, last year (2019) was a good example of this.

Both equity and fixed income investments generated returns that were well above historical averages. Times like these should be enjoyed, but it is important to avoid becoming complacent. There are also occasions when the wind dies, and progress slows to a crawl. These periods can be frustrating because it is only natural to want to advance toward your destination at a reasonable pace. During times like these, maintaining patience is critical, both on the water and in an investment portfolio. Getting greedy or becoming overly ambitious can lead to increased risks; this is something that sailors and investors alike come to learn with experience.

Every veteran sailor has also had to deal with stormy weather. Preparation is key; one might not know exactly when a storm will hit, but a skilled sailor has a plan in place to deal with periods of rain, strong winds, and large waves. Likewise, a financial plan can help you prepare for the economic challenges you can expect to face during your life. Much about the current environment is unprecedented, but an economic slowdown (usually accompanied by a stock market pullback) should be expected to occur at least once per decade. Having sufficient emergency savings, a practical debt management strategy, and proper risk management solutions in place are important elements of financial planning that can help you ride out an economic storm.

On a sailboat, the best strategies for getting through stormy weather include:

1. Amending your route to avoid the worst of it

2. Trimming (adjusting) the sails as necessary

3. Remaining calm

Just like a sailor trims the sails in strong winds, you have the option of rebalancing your investments in periods of financial uncertainty. However, it is critical to avoid panicking in these situations. An experienced sailor understands the importance of controlling their emotions during stressful periods and sticking closely to the pre-established plan.

It is normal to feel at least some level of concern and anxiousness during periods of turbulence in the stock market, just like it is natural to be fearful while navigating rough seas. A trusted financial advisor can be invaluable in these situations by helping you stay calm and stick to your plan. Acting with equanimity (composure during a difficult situation) is the most effective way of making it through both stormy weather and a volatile stock market.

As bleak as it might appear, every storm eventually passes. The waves calm and the sun comes out again. Your planned route may have been temporarily altered due to the storm, but this should not be cause for lasting concern. Your journey can still be a successful one despite having had to navigate the occasional stretch of bad weather. Working with a financial advisor helps you stay on course and arrive safely at your planned destination, despite the stormy seas that may arise along the way. ■

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