We’ve all heard ‘slow and steady wins the race’ but that advice is difficult to follow in many aspects of life. Shortcuts are often taken in the hope of reaching the goal just a little bit faster. The success of one shortcut leads us to believe others will be as successful. We’re prone to do the same with our investments.
Those who frequently take shortcuts eventually place themselves in dangerous positions.
The Pacific Northwest is full of beautiful hiking trails of varying difficulty. Some of the more strenuous trails take you to great heights and reward you with vistas of snow capped mountains. Gaining the summit provides a feeling of being on top of the world where you sit in awe of God’s creation.
Reaching your investment goals provides a similar feeling of great satisfaction.
Neither is easy to achieve. Perhaps that’s what makes it so rewarding.
Mountain hikes and financial plans are full of opportunities to take shortcuts. Those shortcuts offer a chance to leave the trail and cut across the landscape in an effort to reach the summit quickly. Nowhere is it more evident than a switchback.
It seems reasonable to take an available shortcut when you’ve been climbing up that mountain for so long in an effort to reach the summit. Why not climb up that 60° incline to arrive on the same path above where we currently stand? We justify that twenty steps at a steep incline will be more rewarding (and faster) than the next 100 on the trail… or that skyrocketing stock will create wealth faster than the boring Total Stock Market Index. The problem is that both decisions take us off the established path.
When you deviate from the trail, you increase your chance of injury. When you deviate from your plan, you increase your chance of failure.
There are specific reasons for switchbacks. Trails are created based upon a plan that takes into consideration the topographical features specific to that area….just like your financial plan should be based upon your unique situation and goals. The landscape dictates the route up the mountain. Your goals and current situation dictate the financial plan.
What we should be looking for is consistency.
Slow and steady worked for the tortoise. Slow and steady works for the mountaineer. Slow and steady works for the investor and the financial plan.
Don’t take shortcuts to avoid the perceived switchbacks of your financial plan. A well-charted path is the best way to reach the summit and achieve your financial goals.
Kyle Rash holds a Master's Degree in Financial Planning. He is also a retired Marine combat veteran and the founder of Champion Financial Planning.
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