The Investors Journey – Ramsey Crookall
Sitting on my shelf at home is a well-thumbed and dog-eared copy of one of my favourite books, Bill Bryson’s A Walk in the Woods. The book follows Bryson’s attempt to thru-hike the Appalachian Trail in America – a monstrous 2,200-mile trail over mountains, through forests and valleys, coursing through 14 states on the east coast of the U.S. Ultimately, despite his best intentions and some extortionately priced walking gear, Bill doesn’t complete his journey. Through all his planning, Bill didn’t quite appreciate what was ahead of him. Whether it be the absolute beauty of the wilderness, the crawling pace of progress on the trail, black bear encounters or his apathetic hiking buddy Stephen Katz. The book is an often funny mix of the highs, lows, and everything in between of long-distance hiking.
Much like Bill’s excursion, the investor’s journey is seldom linear. Like the mountains and valleys of the trail, markets will peak and trough as they navigate the economic cycle – and just like Bill, it’s possible, even likely, you will stumble upon a 400-pound Ursus Americanus – a bear (…market)!
Proper planning is the foundation of any successful journey, whether investing or travelling. For the investor, this will include the destination (financial goals/objectives) and the tools at their disposal (capital). The destination is not the same for everyone and could be early retirement, a child’s education, or simply financial freedom.
The capital you have will depend on your financial health, including your income, expenses, assets and liabilities. Should you intend to invest regularly, then does your current lifestyle provide enough room in your monthly budget? If you have a lump sum to invest, it may be wise to review your current liabilities, as it may be more beneficial to reduce any outstanding debts that you may have. These could be in the form of short-term high-interest loans such as credit card debt or long-term ones like a mortgage.
Your financial strategy should also take into consideration your time horizon and appetite for risk. Your risk appetite ultimately reflects how comfortable you are with potential losses, as stock markets can be volatile in the short term. Younger people tend to have longer investment horizons, over ten years or so, and this is generally reflected in them sitting higher up the risk scale where short-term capital protection isn’t of priority. Conversely, an investor nearing retirement and seeking capital protection may have a horizon of under five years, wishing to invest in safer assets with lower potential returns. By having a firm understanding of both your risk tolerance and investment timeframe, you will be able to build a portfolio that aligns with your financial goals.
A further aspect that investors should pay attention to is the associated costs, not only initially but also ongoing, as fees can eat into their potential longer-term return.
Like the trail in front of you, the investor’s journey requires careful planning. You have plotted your route, checked your gear, packed your provisions, and are ready. Just remember, even the most experienced hikers encounter unexpected detours on their journey. Embrace the path ahead, learn from any stumbles and enjoy the views along the way. The reward of reaching your financial goal will be well worth it.
In life, you will reach many forks in the road, with each path requiring a different strategy. Some journeys are more successful with a guide, especially one with experience in the terrain. This is where Ramsey Crookall can assist. Whether you’re in the planning stage of your investment voyage or are in the midst of a trek and need some assistance, feel free to contact a member of our experienced team who would be more than happy to help you on the right path.