Navigating the Fog

One of the lessons I learned at the track was the importance of vision. Look at the path you want your car to take. Turn your head and focus your eyes on where you want to go. Amazingly, it worked every time in the slalom, autocross, track laps and even everyday driving.

But what if you can’t see where you want to go? A few weeks ago, while on a drive with the Ferrari Club (Desert Region), we encountered thick fog; a rather rare driving condition here in Central Arizona. We slowed down and cautiously navigated through the mist, and it was a big topic of conversation when we reached our lunch destination.

I was recounting this adventure to Lyn St. James, a friend and 2-time winner of the 24 Hours of Daytona, winner of the 12 Hours of Sebring, and veteran of the 24 Hour of Le Mans endurance race.  I asked her, “How do you drive in really difficult conditions when you can barely see the road ahead?” She replied, “Follow the yellow line!”  Of course, that made total sense – but what does that really mean?

When driving, you’re following a predetermined path that is represented by the yellow line. That’s your way forward. There may be curves, hills, and even oncoming traffic – not to mention the annoying car up close on your bumper.  If you follow the yellow line despite difficult and distracting conditions, you’ll eventually get to where you want to go.

So what if you can’t clearly see your investment path?  What if you can’t see past the windshield while driving on your investment road, which is supposed to lead you to financial security? What if all the volatility in the market is disturbing and frankly a bit scary?

See where I’m going with this? Don’t you just love how my mind works in metaphors?

What if the talking heads on TV and on the Internet are offering multiple and often inconsistent messages? Just follow the yellow line. Follow your asset allocation strategy.  You do have a well-thought-out plan, don’t you? If not, we should talk.

Your asset allocation strategy should be designed to create an all-weather portfolio. One that performs well in sunshine as well as storms. It should have the appropriate mix of asset classes and should be actively managed and re-balanced when market or economic conditions warrant.  This will keep you on track and focused on where you want to go financially and prevent you from veering off course – or worse – running into a financial ditch.

In a foggy situation it can be dangerous to pull off the road. In a volatile market it can be fatal if you pull out of the market, cash out and then attempt to time your reentry back into the market. It’s highly likely that not only will you get it wrong, but you’ll get it wrong twice; by selling at the low end of the market and buying back in at the high end of the market.

So, stay focused on your asset allocation. It is your yellow line.

Lyn St. James and I are proud to support the RPM Foundation in accelerating the growth of the next generation of restoration and preservation craftsmen through formal training and mentorship.

Investment Advisory Services offered through Mutual Advisors, LLC DBA Biltmore Advisors,

an SEC registered investment advisor.