What Sailing Taught Me About Investing for Retirement

University of Hawaii's Sailing Team at the 2023 Harbor Cup

Winning the moment feels good, but winning the long game is what matters. As a sailor, my job is to take in information such as the wind, the water, and the positioning of other boats to make informed decisions about which direction we should head. It’s rare that all the factors line up perfectly, and often it comes down to making a plan after carefully weighing risk and reward. Investing, in many ways, is no different.

For some background, a sailing competition, known as a regatta, consists of a series of races among a fleet of competitors. In each race, your score is determined by your finishing position. First place earns one point, second place earns two, and so on. At the end of the series, the goal is simple: Finish with the lowest total score.

During each race, there are countless variables I must consider. Wind direction and speed, current, and the behavior of the boats around us are all constantly changing. Because conditions are dynamic, it’s impossible to make perfect decisions. Similarly, there is no shortage of information available to investors. Company financials, growth prospects, valuations, economic data, and market trends are everywhere. Every call involves trade-offs, and every decision requires weighing potential upside against possible downside.

Many people think investing is figuring out which companies are undervalued or performing well and buying their stocks. Unfortunately, like the wind and the water, markets are unpredictable and constantly changing. That’s why I always come back to the big picture.

The biggest regatta of my college sailing career was the Port of Los Angeles Harbor Cup, where ten of the best college keelboat teams met to battle for the prestigious trophy. Going into the final race of the competition, we were sitting in first place, but only a couple of points ahead of our next competitor. In one moment of the race, I spotted a large gust of wind on the right side of the course, while most of the fleet was heading left.

At first glance, it might have seemed obvious to sail toward the gust and try to win the race. But the wind can change. If it filled in from the left instead, all those boats could suddenly gain an advantage and pass us. So what’s the right move, protect our current position or take a big risk for a potential win?

In this moment it was obvious. We were already winning, so the best decision was to be conservative and stay within a couple positions of our nearest competitor. We sailed off to the left, kept our competitor behind, and won the regatta. It’s important not to let your short-term goal of winning the race cloud your judgment, when your real objective is winning the regatta. These same principles apply to investing for your retirement.

UH Sailing Team Wins the 2023 Harbor Cup

When planning for retirement, it is important to first understand where you are today. Do you have a long time horizon before you need the money? If so, you can take more risk, knowing that your portfolio has time to recover from a market downturn. As you near retirement and get closer to needing that money, you might take some risk off the table to preserve what you’ve already built.

It is the same as a regatta. In the early races, I am more keen to take bigger risks and try to win races to get ahead. As we go on through the races, it is wise to be more conservative and protect the lead we’ve already built.

In both investing and sailing, it is important to zoom out and focus on the big picture. What are your goals? What is your time horizon? How much risk can you take and just as importantly, how much risk are you willing to take?

The answers to these questions are much more important in building a long-term investment strategy than the short-term performance of any single stock. We are not looking to win every race, time every market swing, or pick the top performing investments. We’re looking to consistently make disciplined decisions, with the end goal in mind. We know the conditions won’t always be perfect, but we have a plan.

Thank you for reading. Enjoy the long weekend!

Owen

Investment advisory services offered through Andrews Advisory Associates LLC, a registered investment advisor.  This blog is not meant to give investment advice. Before investing in any advisory product please carefully read any disclosure documents, including without limitation, the firm’s Form ADVs. The information herein is provided for informational purposes only, and does not constitute an offer, solicitation or recommendation to sell or an offer to buy securities, investment products or investment advisory services. Nothing contained herein constitutes financial, legal, tax, or other advice. These opinions may not fit your financial status, risk and return profile or preferences. Investment recommendations may change, and readers are urged to check with their investment adviser before making any investment decisions.