Steady as they go (03/17/2020)

Steady as they go

We are in the midst of scary times. There is a lot of uncertainty about the coronavirus. Our government officials are shutting down schools, churches, restaurants, bars and all other places and events where we tend to gather in groups. In fact, just before I wrote this, President Trump held a news conference advising people to avoid gathering in groups larger than 10. This is good advice that we should heed to protect our health and that of our loved ones.

The problem with scary times is that they cause us to narrow our thinking and employ hardwired thinking tools that may not serve us well. Humans are particularly good at spotting patterns. When we see a scary pattern our fight or flight instincts kick in. Our sights are drawn to the short-term and we lose sight of the long-term future.  These thinking tools serve us well when we are facing physical danger – such as spotting a poisonous snake or happening upon a bear in the woods – but they do not serve us well when we are facing financial dangers. Instead, we have to take a deep breath, put space between our emotions and our actions and use that space to set our sights further into the future.

I learned the value of setting my sights off in the distance when I took the helm of the O W Fowler, a scaled-down, square-rigged sail boat at Culver Summer Naval School. Once the sails were set, the skipper gave me a compass course setting and told me, “steady as she goes”. I set my eyes on the compass a few feet in front of me. As the ship started to veer off-course, I turned the wheel in the opposite direction to bring her back on course. Now the bow swung off-course in the opposite direction so I tried to correct again. The harder I tried to maintain a steady course, the more I seemed to get whiplashed. I was losing control.

The skipper grabbed the wheel and steadied the ship. Then he told me to look out over the bow and pick a spot off in the distance. About a half mile on shore I spotted a water tower. He told me, “OK -keep your eyes on the water tower and steer toward that.” Problem solved. I maintained a straight and steady course until it was time to come about.

When managing our investments, if we allow our sights to become set on the scary circumstances of today, we tend to make corrections that cause us to get whiplashed and lose control. It is difficult to do but it is critical in scary times to set our investment sights on the distant future. Unless you have to sell an investment today, set your sights on a time in the future when you may need that money – say 3 to 30 years from now. When you do, you will realize that the best way to stay in control is to hold your investments, “steady as they go”.