A few years ago, we had an intern, and one of the tasks we set him was to reflect on life lessons that related to investing and financial planning.  He developed a mental map for the process that resonated with him, and it looks like it has other common threads.  Similar posts (like this one on CNBC) and this one show that there are commonalities between his experience and those of others, and there are other followed a similar line of thinking. This makes sense, given that about 33 Million people in the U.S. engage in recreational angling.  It goes to show that many lessons are universal, and common to our human experience. I am including his thoughts here, so you can hear from somebody else, somebody who is finding their way through the same maze that the average person is navigating.

Here are his thoughts:

Labor Day is the annual nationwide holiday that is dedicated to the social and economic achievements of American workers. The contribution of the hardworking members in the work force is what formed the country we live in today, and continues to build strength, prosperity, and the well being of our country today. This tribute gives workers a day of freedom to spend how they like reminding them of the appreciation of their efforts. Some people use this day to enjoy spending time with friends or family doing activities such as golfing, shopping, or even taking a personal days rest from their busy schedules.

When I was boy, I remember a particular Labor Day weekend I will never forget. My dad and I visited my grandpa for Labor Day weekend and embarked on my first fishing trip down in Florida to fish both, on the ocean and nearby ponds. When my dad was growing up, my grandpa took him to several places around the world on fishing trips, learning from experienced guides on how to catch the local fish. In other words, they know a lot about fishing and I had the opportunity to learn from experienced fishermen. Interestingly, what I learned was not limited to how to bait, cast, and reel, but I unknowingly learned valuable lessons that are applied to financial planning and investing. 

Lesson One: Sometimes, you need a guide

With all the fishing trips to foreign areas that my dad and grandpa took, they always hired a guide. Our guide had local knowledge as to where the shallow waters to avoid were and the way back to the marina as well as how to catch the fish we were hunting, tarpon. By using the guide, we were reeling in beautiful fish of all varieties, which made the trip memorable and a success. A guide is like a financial advisor to managing your money. An advisor helps you reach your financial goals by providing direction to deep, safer waters before you get stuck in the shallows. Even with experienced investors, advisors can help just like the guide, with expertise that leads to success. Do not be hesitant to seek out a financial advisor and know how to choose the right one. Check out Tom's post on Choosing a Financial Advisor.

Lesson Two: Always be prepared

Before embarking on any fishing trip it is important to be prepared for the excursion ahead. This means you have to have life vests, food, poles, bait, emergency equipment, the list goes on and on. All good financial plans have an emergency fund that is used in case things go wrong such as losing a job. This safety net will keep you afloat until a new opportunity presents itself. All fishermen admit that they have made the mistake of forgetting something before setting sail; sometimes it is something minor and sometimes it is as important as forgetting to fill up on gas. In either case, a good investor always strives to be well prepared and seeks to establish a plan so they may be able to thrive when difficult situations arise. Just like a guide will always have a reserve tank for gas onboard. The key to survival when dealing with these situations is always being prepared.

Another preparation that is important to success in both fishing and investing is a well thought out strategy. Before a fishing excursion there must be a strategy of what time of day to fish (market timing), where to fish (what industries to invest in), what bait to use (investment strategies), and if the fish aren’t biting, move to Plan B. To learn more about how to prepare for your investment endeavors, begin creating your own Investment Policy Statement (IPS) that details your investment goals and objectives as well as the path to pursue them. For morefrom us about investment policies, click HERE.

Lesson Three: Patience vs. too much patience

Patience is a necessity to success when it comes to fishing, just as it is with investing. I learned the necessity of patience while fishing in nearby ponds with a bobber by constantly reeling in my line to cast to different spots far too often, assuming there were no fish in the area. This is not to say that I was completely unsuccessful using this strategy, as I ended up catching a fish or two. Conversely, my dad and grandpa exercised patience, knowing that eventually the fish will bite. Needless to say they caught many more fish than me. The lesson we can translate to investing is that you must give your investment time to grow and not focus on the short-term performance to make selling decisions on your investments. If you don’t have success right away, don’t think that there won’t be success in the future. Here, patience and implementing a long-term approach could show the success that can be pursued in investing.

Even though patience is a needed trait in fishing and investing, there may come a time when too much patience can be detrimental. Lets stay with the example of fishing in local ponds to explain. There were several ponds within walking distance of us so we started fishing in the pond nearest to us. After about an hour of fruitless fishing, we walked to the next pond and after about 5 minutes, we had our first fish on the line! Understand that in some cases, it is best to be able to pull up the lines and switch to a different pond. The same goes for investments. We have to be able to determine a time to switch strategies or investments to pursue success in the market and seek to prevent loss. Determining when to make this decision is difficult and many fail to do so before resulting with a loss. However, with a detailed path to meet your investing goals outlined by your IPS, making these decisions becomes easier.

Lesson Four: Expect the unexpected

Just like investing, fishing can have unexpected results that’s impossible to anticipate. One day you may catch zero fish, while the next day can result in an abundance of fish. We know that stocks may be volatile and, on any particular day, a stock can move up or down dramatically. While the first day fishing on the closest pond to us, we didn’t have any success, and assuming there were no fish in the water, we switched ponds. The following day we cast our lines out in the first pond and fish were on the line within seconds. We couldn’t predict how the fish would act and we can’t predict the movements of the stock market. One day it may look like the stock is never going to rebound a decline in price and then the next it might turn out to be one of the best investments in your portfolio.

The same is true for the other way around; one of the best performing stocks in a portfolio can turn the opposite direction right before your eyes. I saved my favorite story from my fishing trip until the end to explain the volatility in the market. While on the ocean, we were fishing for tarpon, a beautiful game fish that are a prize of the sea. There were several boats that were following a pack of tarpon that were swimming close to the surface; everyone was desperate to in landing one. As you predicted, I got one on the line. It wasn’t just another tarpon either; the guide said that it was a monster, probably around 120 pounds. I think he might have just been saying that to please his client, as any guide would do. My adrenaline was pumping as I was reeling in the fish and what seemed I was fighting for my life. Several times I would get the beast within 20 yards of the boat and then I would hear, “ZZZZZZZZ” when the fish sprinted away from the boat. After 20-30 minutes of fighting, I was determined to land the fish and knew that it would get tired and soon give up. Suddenly, we see splashing and wrestling on top of the water. It turned out that a shark saw the distressed fish and went for lunch. In efforts to save the life of the fish, the guide cut the line in hopes of an escape. We carefully watched for more action and about 10 seconds and 200 yards away from the original splash, we saw another splash. This time, the splash was red with blood. I was left heartbroken and full of grief. The lesson I learned from this when investing in stocks is that anything is possible. What seems like a promising investment one day can result in the exact opposite another day.

We can use these lessons learned from my Labor Day fishing experience in many different ways in our lives, especially with investing. Remember, even experienced investors can need some guidance every once and a while to be successful. Always strive to be prepared in order to remedy the unexpected. Exhibit patience and give ample time to let investments grow, but always be weary of when to pull the line out of the water. And lastly, never forget that your expectations do not always become a reality; expect the unexpected.

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