For many years I have enjoyed backpacking. Over the past 10 years, or so, I have been on five or six 50-mile backpacking trips. I enjoy spending time with family and friends and enjoying the beauty of the great outdoors. One of my favorite backpacking trips covers part of Kings Canyon and Sequoia National Parks. Three times I have been on a loop named Dead Man’s Canyon Loop. One of the best parts (especially for the two groups of scouts I hiked with) is where we go off-trail at Upper Ranger Meadow and hike to Big Bird Lake and the Tablelands.
One of the challenges with going off-trail lies with the possibility of getting lost – after all, you don’t have a trail to follow. In instances like this, it is critical to follow the directions of a guide. On my third trip hiking this loop, I was the designated guide for a group of 10. When we got to Upper Ranger Meadow, our faster hikers did not want to wait for everyone’s rest break and chose to hike for Big Bird Lake. (One of the three faster hikers had been on this loop two years prior and felt comfortable with getting to the lake.)
When you first leave the trail, you see a saddle ridge about a mile away – that is your first waypoint. The hiking is on granite and looks fairly straightforward, but can be fairly grueling at times. There is a small stream that bisects the hike to the top of the ridge. The big question is whether you stay to the left of the small stream or jump over the stream and go to the right. When I started leading the remainder of the group, I remembered that we needed to cross the stream. The rest of the hike to the saddle ridge was tiresome, but uneventful.
We found great joy as we reached Big Bird Lake and thought we would find the faster group swimming, but they were nowhere to be found. My wife and I backtracked for a little while looking for the missing three (our son, daughter and soon-to-be son-in-law). After a while we finally spotted them. They were on the other side of the stream. However, the little stream we crossed lower on the mountain had carved a fairly large ravine higher up on the mountain (with multiple little waterfalls) – they had no way to get across.
As a result, they had to descend to find a safe place to cross and I stood higher up on the mountain, waving my hands, to help direct them back to the correct “path”. Unfortunately, their discomfort with having to wait for others caused them to depart from the plan to stay together. This choice led to additional worry and hard work.
What does this experience have to do with the stock market and the experiences we have had over the past 10 months (the S&P 500 is down nearly 22 percent year-to-date)? When we work with our clients, one of the very first things we focus on is a long-term investment plan. We discuss the potential ups and downs of the stock market but also focus on the long-term results in the stock market. This long-term investment plan can feel grueling at times (many may feel that way right now) but if historic long-term returns continue, the long-term plan should result in great joy.
However, we need to be careful that we don’t let investment discomfort result in a short-term plan change. Unfortunately, short-term plans can lead to other short-term plans and generally can lead to simply reacting to the stock market. Reacting to the stock market (i.e., jumping into the market when it looks good and jumping out when it looks scary) generally has been shown to reduce overall returns and cause more investment turmoil. Similar to my “lost” children’s short-term hiking plan, a short-term investment plan may result in losing ground and extra effort to achieve our goals.
This does not mean that someone can’t or shouldn’t change from one long-term plan to another long-term plan. After all, life is nothing but change, but it does suggest we need to look deeply to be sure we are not changing from a long-term plan to a short-term plan. Short-term investment plans may make achieving long-term goals more difficult.
The key to a greater chance for a successful long-term investment experience can be summarized into the following six items:
- Create an investment plan to fit your needs and risk tolerance. (https://www.montageadvisors.com/blog/to-van-or-not-to-van-that-is-the-investment-question)
- Structure a portfolio along the dimensions of expected returns. (https://www.montageadvisors.com/blog/marital-bliss-and-dimensions-of-return)
- Diversify globally. (https://www.montageadvisors.com/blog/road-trips-and-diversification)
- Manage expenses, investment turnover and taxes.
- Stay disciplined through market dips and swings. (https://www.montageadvisors.com/blog/speeding-tickets-and-timing-the-market)
- Don’t panic. Invest for the long term. (https://www.montageadvisors.com/blog/family-fears-resiliency-and-optimism)