I was on a flight to Chicago recently that was projected to be smooth skies from beginning to end.  About halfway through the flight we encountered some small bumps, the ones that shake you from side to side a bit.  Soon, the pilot made an announcement that we were getting some reports of rough skies ahead from other flights, so we needed to fasten our seat belts.  We all did, and sure enough we encountered some big dips, the ones that make your heart skip and have you holding on to the arms of the seat.

Soon enough, those big bumps were over and we were back on track to our destination as scheduled and we of course arrived safely in Chicago, even with a bumpy landing due to some cross winds.

Now, I didn’t have to fly to Chicago if the inevitable turbulence made me too unsettled.  I could drive and have a completely different experience.  The journey would certainly take longer, and because of that I would have to adjust my plans completely if that were my preference.  I could stay on the ground, take longer, and still get where I wanted to go.  I’d just have to the prepared for the extra time it would take.

Some feel like the risks of flying are too great.  Every time a plane goes down it makes the news, and we all get a jolt, wondering what would have happened if that had been us.  No matter how scary the news, it doesn’t change the fact that flying is in fact incredibly safe, much more so than driving if we look at the statistics.

In my anaology here, stocks are like planes, and bonds are like cars.  If you can’t be comfortable with the idea that you’re going to have some small bumps and pretty rare big bumps, then you’ve got to consider if flying (or investing in stocks) is right for you.  Chances are you can reach your retirement destination investing only in bonds, but it is going to take you substantially longer.

So maybe you are comfortable with small bumps but not big bumps?  If that’s the case then we can change the altitude or the course of the flight, by adjusting the mix of stocks and bonds.  The more stocks, the faster you will likely reach your journey, but a longer flight that limits the turbulence might be something you’re comfortable with.  If that’s the case, adjusting the mix of stocks and bonds in your portfolio can still get you to your journey with more speed than a car, but not as fast as some other planes may get there.

If your destination hasn’t changed, staying the course on the flight is probably your best option.  Maybe you want to change the flight path to move more slowly or to experience fewer big bumps, and if so then maybe we change the portfolio a bit and have fewer stocks than we did before.  The best portfolio (or flight path) is the one you can live with when things get bumpy.  The worst plan is for you to open the door and jump out of the airplane because the perceived risk of turbulence has become too much for you to handle.

Yes, it’s bumpy out there right now.  It was a pretty smooth 5 years or so prior, with a nice climb from the last real stretch of turbulence we experienced. Flying is never always smooth.  But airplanes are (historically, like portfolios) exceptionally reliable vehicles.  We can count on there being some bumps, but we also know that it should get us to our retirement destination.

So what should you do when there are big bumps? Focus on something else.  If the passenger next to you is sweating and praying the rosary, it’s probably not going to help you feel any better.  Have conversations with other passengers about what is going on in their families and lives right now.  Read a book that you’ve always wanted to read, or pick up that magazine about your favorite hobby.  Any of these things are more productive and will make you happier than talking to other passengers about turbulence or listening to the news broadcasts and the talking heads making their predictions about when the turbulence ends.  They don’t know any better than you or I.

Stay calm and focus on what you can control, and not on what you can not control.  Clearer skies are ahead if history is any guide.

You’re always the pilot of your financial life, so I guess that makes us the air traffic controller.  Stay on the radio with us.  We’ll talk you through it.