by Scott Ronalds
I was sitting on the patio at Dusty’s (Whistler’s famed après ski hangout) the other week with my dad and a friend of his. We’d scored a prime table (no easy feat). The lactic acid in my legs was about to be remedied with a fresh pint of B.C.’s finest hops. The sun felt oh so good on my face. The legendary Hairfarmers were scheduled to hit the stage shortly. I was in my happy place.
And then came the question from my dad’s friend (who I’ll call Ted). “What’s your guys’ forecast right now at Steadyhand; are you getting out of the market? I’ve been sitting on some cash for a while and don’t know what to do with it. Seems crazy to put it into stocks with everything that’s going on. I’m inclined to sit it out until things look better.”
The conversation took a 180. We changed gears from talking about fresh tracks off Harmony Ridge to market timing. Not that I don’t like talking about investing, but conversations about market timing usually kill the party. Here was a business opportunity, though, and a chance to help my dad’s friend. I gave him our stance at Steadyhand.
It went something like this. “We’re cautious right now, so we’re holding less stocks and bonds in our Founders [Balanced] Fund than we normally would, and our focus is on higher-quality securities. We would never get out of either asset class though, because we don’t think anyone can consistently time the market or predict what’s going to happen in the short term. Our view is that you always want to stay diversified and stick to your plan. If you’ve got cash to invest but are worried about the markets, you should consider phasing it in to your long-term mix over the next 12 months or so, but the longer you sit on cash, the harder it will be to ever get it invested. There’s a great phrase out there: time in the market always beats timing the market.”
I got a detached look in return. Thanks kid ... cheque please.
Ted didn’t want to hear investment-speak about “staying diversified” and “sticking to a plan”. He wanted to hear something sexier, like we’ve been selling everything and have a plan to get back in at just the right time. But good investing isn’t sexy. It’s boring and repetitive, with some bumps guaranteed along the way.
In reflection, if I brought the conversation back to a language more fitting of Dusty’s patio, the message may have been more effective ...
“Skies are overcast with limited visibility, but we see no reason to stay off the hill. There’s still some good snow to be found where others aren’t looking. That said, we’re cautious of the risks building in the backcountry and are sticking mostly to the groomers. Wind gusts have picked up and we’re wearing an extra layer right now for protection, but we can peel it off if needed.
If you’re inclined to stay off the mountain because of a variable forecast, you’re going to miss out on some epic days. Ted, you know that the weather can change in a heartbeat, and those forecasters are never right. If you’re holding out for that perfect blue bird day, you’ll never get back on the hill. There will always be a reason to just stay in the hot tub (the weather’s too cold, lift lines are going to be huge, etc.). But remember, time on the mountain beats timing the mountain.”
We’re running into more and more people in a situation similar to Ted’s. They’re either sitting on cash and are wary of putting it in the market, or think they need to get out entirely. Memories of 2008 are still fresh. But staying out of the market or trying to time it isn’t the answer. You need a plan. In whatever language resonates.
(For more on the strategy of phasing money in over time, or dollar-cost-averaging, see our article on the topic.)
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