This post was originally published on this site
In 2021, my wife, son and I set out on a week-long excursion across Yellowstone and Grand Teton National Parks. The trip sparked a passion for travel and hiking coupled with the desire to visit every U.S. national park.
To date, we’ve traveled to 40 of the country’s 63 sites.
Throughout these adventures, I have quickly come to find that the lessons learned on the trail correlate closely to investing.
Stay the course and remain disciplined
This past summer when we were hiking in Montana’s Glacier National Park, my family came across a grizzly bear. It happened suddenly — we turned a corner and stopped in our tracks when we realized that the bear was just 100 feet ahead on the path.
During a ranger session we attended the previous night, the park ranger advised that hikers “be prepared” to encounter a bear and, if it were to occur, to remain calm as to not spook the bear or give the perception that we were a threat. Turning to run away could trigger a predatory reaction in the bear. We followed his counsel and stayed in place until the bear carried on.
Some might have turned back after the encounter, but we cautiously continued forward. Thanks to the wise park ranger, we had a plan, and knew what we might encounter on the trail. If anything, running into the bear validated the time we spent in the ranger session the night before.
Taking a slow, calm, methodical approach is not dissimilar from how an investor should react when confronted with unexpected market volatility or intimidating headlines.
Volatile markets and prolonged declines in the market are inevitable, but much like a bear on a hiking path, it can feel surprising.
Rather than reacting in the moment to the unexpected, investors should focus on what they can control. Through short-term developments in a down market, it’s imperative to remain grounded in one’s plan and not make rash decisions. While all investing is subject to risk, preparedness, a calm demeanor, and disciplined approach to one’s financial plan will enable an investor to stay the course, ride out market-related challenges, and successfully track toward long-term financial goals.
If investors are having a hard time stomaching the volatility in their portfolio, it might be time to talk to a financial adviser about risk tolerance. To keep up the analogy: not every trail is for everyone.
Keep investment costs as low as possible
Each year, my family purchases an interagency park pass, allowing entrance to any and all of the national parks for around $80.
During one recent trip, we visited seven different parks across Utah and Colorado, highlighting the value of the pass relative to what is paid for it. Families can have an amazing set of experiences for a relatively low cost.
During our first park trip, we were unaware of the pass and its pricing benefits. At one point, we paid the $35 standard entrance fee to get through the gate of one park, and another $35 fee when we visited a second park during the same trip, putting us at more than three-quarters the cost of an annual pass. The following year, we quickly opted for the park pass, ultimately saving us hundreds as we continued on with our yearly travels.
Connected to investment best practices, costs matter. Whether an investor is just starting out, or a seasoned veteran, one basic principle that is critical not to overlook is understanding investment costs and keeping them low. Put simply, the less an investor pays in investment expenses means the more they keep in returns. Over the long-term, those returns — or savings — can significantly add up.
If incorporating low-cost investments into a portfolio, be aware that different investments have different costs. For example, mutual fund costs include expense ratios, measured as a percentage of the amount one has invested, while individual stock costs are primarily bid-ask spreads, the difference between the highest price a buyer will pay and the lowest price a seller will receive.
Know when to leverage support
One of the standout memories of our park travels so far has been hiking The Narrows in Utah’s Zion National Park, a popular trail made unique given its miles-long trek through knee-deep water. A hiking pole is a must for one’s stability, maintaining proper support and balance across uneven, rocky terrain.
At first, I resisted bringing poles — it was just one more thing to carry. But, my wife insisted, and as the current picked up a mile or two in, boy, was I glad I had them. When an investor finds themselves traversing challenging market conditions or experiences complex financial planning and retirement needs, a financial adviser can be analogous to the hiking pole. While an adviser provides financial expertise to their clients, one of the most important roles they have is being a financial coach, providing stability and supporting clients through complex and, sometimes, emotional financial decisions.
For some investors, “going at it alone,” can be a positive experience. But, for others, the human element of an adviser interaction is a key component to addressing an investor’s individual goals and challenges.
At any point in one’s financial journey, if an investor is unsure of the direction to which to move forward, has confusion over funding their short- and long-term goals, and/or prefers the guidance of a professional to provide their insight, seeking the support of an adviser can be the right move. There is a perception that only the uber-wealthy want and need financial advice. However, particularly over the last decade, the financial industry has evolved, now providing low-cost, high-quality advice services for individuals and couples of all wealth levels.
Our family looks forward to continuing our national park adventures and, one day, checking all the sites off our list. Just as we have set out with our robust travel goals, I’d encourage investors to chart a similar financial journey. With a well-prepared plan and disciplined approach, investors will be on the right path in meeting their long-term goals.
Jon Cleborne, CFA, is a principal and head of Personal Investor Advice at Vanguard.
