Pacing Yourself: Advanced Lessons (Part 2)

Personal Money Planning |

By Gary Silverman, CFP®

Last week I gave y’all a synopsis of a half-marathon I had run at the end of spring. The synopsis of that synopsis is that I started out running a perfect speed but for the wrong race. I was running as if the temperature was moderate and dry. That day the temperature was elevated, and the humidity was high. For some reason that didn’t dawn on me until half-way through when bad things started happening to my body.

What’s that got to do with investing?

Back in 2009, we were just hitting the bottom of the financial crisis. Over the succeeding years, the stock market not just recovered it went into overdrive and the throttle was stuck wide open. Because of that, you may think the “best” way to invest over the next 13 years should look the same as the last 13 years. If that’s you, I think you are deceiving yourself.

Just like I did at the start of that race.

I could feel the temperature and humidity and didn’t allow it to change my plans. I could easily have collapsed into heat exhaustion. Only because I had experience (I had done stupid things in training before), I knew how to recognize the signs I was getting into trouble and how to get out of it.

Still, the result was a run that was inferior to the one I could have run if I had started out doing it right.

Back to investing. With US stock valuations high (though I don’t think we’re in a classic bubble), and interest rates low (30-year government bonds are under 2-percent at this writing), do you really think the next 13 years are going to look like the last 13? Stock markets tend to have strong, prolonged bull markets followed by gyrations that look, but don’t feel, like a plateau. As the markets continue to go up, the closer they get to the plateau.

There are possible avenues to success here: 1) Vary your race to the conditions given to you or 2) Run every race to be able to finish regardless of the conditions.

For my run, I could know what the conditions would be for the race. Predicting temperature and humidity for the next 2-1/2 hours is not that hard. The course was known.

With the next decade of your investments, you don’t know a whole lot. You don’t know what’s going to happen geopolitically or with the climate is a question. You will be surprised by scientific breakthroughs, and I’m not sure what tax rates will be next year, let alone in the 2030s.

No, while plotting out the perfect race strategy at the start line is mostly doable, plotting it out with your investments is not. That’s why I preach to instead plot a course that will work regardless of what the course, temperature, or humidity ends up being. Yes, you likely won’t win a medal, but your retirement or whatever plans you have for your money will be safe and not dependent on guessing the future.


Gary Silverman, CFP® is the founder of Personal Money Planning, LLC, a Wichita Falls retirement planning and investment management firm and author of Real World Investing.