sailingSo far this year, the investment world has been rough on the squeamish. The Dow Jones Industrial Average has seen multiple days with a 200-point rise or fall. This is largely due to uncertainty in the market over oil prices, China’s economic slowdown, central bank activity around the world, and other things. Markets abhor uncertainty.

I often tell clients a simple proverb that helps in times like these: “Tourists watch the waves, but sailors watch the tides.” A sailor in port is not the least bit concerned about the waves crashing on the shore. The focus remains on the tides if a journey is to be successful.

Even if you are in the distribution phase of your plan, you need to watch the tides, not the waves. Having your portfolio in segments for short term, mid-term, and long term allocation helps protect you from short term volatility while allowing your long term investments take advantage of it. An effective strategy is rarely monolithic. It will have components for different purposes.

As for 2016, the economy is not bustling, but it is not suffering either. Employment numbers, consumer confidence, and other indicators point to forward progress, not recession. That could change, but most don’t see it. Our suggestion is to watch the tides, the long term forces that will govern economic activity over time. Waves are for tourists.

Submitted by David M. Wheat, CFS, ChFC