There Will be Light Showers

This is a guest post by Robert, who lives in Calgary and works as a financial advisor retired at 34. He is married, has three kids.  Robert and his wife then plan to return to school and become teachers, eventually living and working overseas.

For the first time, I went on a cruise with my family. My parents-in-law, who are veterans of the cruise, planned the trip and paid for our children, which made the whole project far easier. It was a beautiful vacation, with perfect weather, great activities, fabulous sights and tonnes of good food. The cruise line takes this expectation of perfection to levels I didn’t expect.

One afternoon, while the kids were in kids’ club and my wife was reading a book, I watched a movie. (Johnny English Reborn, for anyone who is curious. It was fun.) Toward the end of the movie, the captain made an announcement that caught me by surprise. “This is your captain. We’ve been tracking a small rain shower and trying to avoid it. Unfortunately, we’re unable to bypass it, so we may experience light showers. They won’t last long, but we suggest you take shelter.”

Luckily, I was already in a shaded, covered place, and the captain was right. After about five minutes, the showers were past. I promise, I have a point other than the fact that the weather in Carribean is idyllic. Last week, I wrote about being optimistic by choice. A reader commented that it’s only really possible to make that choice as long as risks are hedged. That is to say, we know that things still can, and will, go wrong, it’s just that we’re prepared and able to deal with it.

In my investing, I know that markets will go down. It would be perfect for me, once I’m invested, if markets only went up. But when markets go up and down, I am prepared. I know the companies I own, and I check to see if the business outlook for the company has changed. If not, I continue to own the company, waiting out the rough patch. Sometimes, movement in the market creates opportunities. Sometimes, one stock will drop while another rises. I can sell high and buy low on the same day, if I jump at the chance. Although I usually take shelter from the “light showers” in the market, I can sometimes profit from them.

In my financial plan, I know that things won’t go according to plan. A quote I like says that there’s value in planning, although the plan almost never works out. Now I have a greater appreciation for the retired people that I used to advise, with no real opportunity to increase my capital or increase my spending like a working person could. But I feel like I have the perfect “shelter.” Should I need to, I can return to work. Of course, it may not be easy. I’ll have to give up my flexible schedule and I’ll have to explain the gap in my resume. But at the same time, I shouldn’t need to find a lot of hours or a high income, just enough to supplement my investment income through a rough period.

What expected problems are you prepared to deal with? How will you deal with them?

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