Monday, July 8, 2013

What the bottom of the Grand Canyon taught me about investing for retirement. Part 1

My dad and I have been talking about rafting through the Grand Canyon for years. In June, we finally
had the opportunity to spend seven days (along with my son, Christian) traveling 188 miles down the Colorado River through the heart of the canyon. WOW, what an adventure! Rapids, waterfalls, slot canyons, hikes, was 7 full days of pure amazement. On top of all of the fun we had (including two opportunities to do some cliff jumping - check out the photos on I was also reminded of quite a few lessons that relate back to the world outside of the canyon. Specifically, some do's and dont's for retirement planning.

The Grand Canyon is a world of extremes. The air temperature was 105º but the water temperature
was only 47º. One minute you’d be hot as could be begging for a rapid while the next minute you were freezing your butt off and begging for the sun. However, if you averaged the temperatures out and sat in the sun while you were soaking wet, it felt pretty darn good because you were in “the sweet spot”. Not too hot and not too cold, but right in the middle. You should look for that “sweet spot” in your retirement accounts too. You may be tempted to swing for the fences with your retirement investments in order to catch a big return, but more often than not you catch not only a part of a big upswing, but also part of a big downswing as well. Over time, investment portfolios with real big swings up and down always perform worse than those with a nice, consistent average in the sweet spot. Try to find the middle ground and build a portfolio that avoids the extremes. Not only do you typically get better results, you’re usually a lot more comfortable too!

Another big lesson learned was the art of “sucking rubber.” As we would approach a mega rapid (the
biggest one we faced had us going straight up a 15 foot wall of water) our guide would yell out for us to “suck rubber”, which was our cue to get low (low enough to suck rubber), hold on tight and brace for impact against the impending wall of water. The lower you got (the more rubber you sucked) the better the chances of the wave going over your head instead of hitting you in the chest and knocking you off of the raft. There are certain events in in your journey towards retirement that require a little bit of “sucking rubber” in order to make it through relatively unscathed. Sometimes you can see them coming from a mile away and prepare for them. Other times, having a guide that can tell you when to suck rubber can save your retirement account and keep it safely on the raft and heading in the right direction. Make sure you are paying enough attention to the economy and the financial indicators to know when a big rapid is coming. Or, make sure you have a financial guide who can see the rapids that you do not and give you your cue for when it's time to suck rubber.

The amount of beauty in the canyon was unbelievable. There were hidden waterfalls and oasis
around every corner - if you knew where to look. There were plenty of times our guide would pull up to a rock in the middle of a rapid, tie off ...and then head off towards what usually looked like nothing. But then we would duck around a rock wall or up a little canyon and find hidden swimming holes and lush gardens. I was amazed that, in the middle of the dessert, there was an amazing amount of water, flowers and trees IF you knew where to look. We would have passed them by, never having known they were there without our guide, who knew every nook and cranny of the river and exactly where to stop.

When it comes to investing for your retirement and making sure you have enough money at the end of the trip, getting there is kind of like traveling the 188 miles down the canyon. There will be some big rapids that you need to “suck rubber” through (like the crash of 2007) and there will be plenty of hidden waterfalls and oasis (great investment strategies) that you may not see if you’re traveling down a river you've never been on. People who use a guide are more prepared for their retirement, typically have more money in their retirement accounts and know how much they need to save in order to reach their retirement goals. There are a lot of reasons people try to handle their own retirement plans, but the bottom line is you’ll do much better if you have a little help. It’s never too late (or too early) to make sure you’re doing the right things for your retirement account, and it's always the right time to ask for a little help.

Stay tuned for part 2 - "The right equipment"

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