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Crosswind Investing


How to Stay Steady Amid Volatile Markets

How many times have you been flying with someone, whether Captain or First Officer, and you come in for a hefty crosswind landing and he or she puts in absolutely no rudder correction and you end up landing sideways? As the airplane violently yaws back to the centerline and you strain in your seatbelt you think to yourself: “I didn’t see that coming.”

There’s a direct corollary to investing. If you happen to be a do-it-yourself investor, you may be putting your portfolio in the same position as the pilot who doesn’t know how to land when the winds are gusty: you have no rudder to keep you going straight. This is perhaps the greatest benefit of using a wealth manager who is also a fiduciary — someone who is dedicated to keep you going straight ahead — they are your rudder in the investing world.

In the financial industry, as in aviation, there are SOPs and then there are techniques. The financial advisors who follow SOPs, who use historical data and a disciplined approach, likely know how to manage crosswinds in the market just like an experienced pilot knows how to land in a crosswind.

If you recall, when the Coronavirus slammed the global economy in March 2020, the stock market crashed and there was complete strain on the aviation infrastructure around the world. Our government responded rather quickly with the CARES ACT which temporarily stabilized the airlines, and then made it possible for individuals to withdraw up to $100,000 from our 401(k)s as emergency funds. I know many pilots at my airline who immediately tapped that money because they were terrified — especially the junior ones. Unfortunately, as the market drop was sudden and sharp, it was relatively short compared to historical declines and the withdrawals that occurred during the dip lost out on the swift rebound that occurred thereafter (and is still going). The wind was howling, and they had no rudder.

What is your rudder during volatile markets?

As I discussed in a previous article, pilots are inherently cheap (Myself included!). We are DIY experts and hate paying fees for anything. When I talk to my pilot buddies about using a wealth manager who is also a fiduciary, the number one question everybody asks is what are the fees? All I have to do is tell the story in the previous paragraph and how the management fee is worth it in comparison to not having a rudder when you didn’t see a storm coming and your portfolio ends up going sideways instead of straight ahead. Having a fiduciary is like having a solid pilot-not-flying (PNF) sitting next to you, calling out the winds all the way down final, and keeping your ship safe and properly aligned.

Anyone can land a plane when the winds are calm or right down the runway. Start adding in crosswinds and things get trickier. Now add in a crosswind at the limits, ceilings are hovering at minimums, at night, in pouring rain or snow, after you’ve already flown three legs. That’s as hard as it gets as a pilot, and having a solid PNF with you makes all the difference. Same goes for investing and managing your finances. You can do it when times are calm. But when things go sideways like we saw in 2020, you’re more susceptible to making decisions based on emotions, fatigue, and fear. Having a fiduciary on your side during those times is just like having a solid PNF, and that way you won’t become a crosswind investor.

This commentary is provided for general information purposes only, should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.


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