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Our family owns a home in Central Washington on beautiful Lake Chelan.  We try to spend as much time there as possible as it offers so many outdoor activities like swimming, water sports, cross-country skiing, hiking and mountain biking.  Not to mention, some outstanding wineries.

It was on one of those amazing mountain bike rides that I got to thinking about how much mountain biking is like investing and how the lessons of mountain biking can be applied to investing, especially during this time of market volatility and uncertainty.

I’ve been a road biker for a long time, so when I was first out on the trails I felt like I knew exactly what to do.  After all, I’ve had experience on a bike!  I know what to do! And shouldn’t my road bike experience translate to mountain biking? That’s partially true, but not completely.  The terrain is different, how you sit on the bike needs adjustment and when and how to use your gears to maximize what the bike can do for you are all different from a road bike. And, having a trail map is important so that you don’t get lost or end up taking a route you weren’t intending to take.  What you might consider important knowledge about one thing doesn’t necessarily translate to a similar pursuit.

When I first started, I often took excess risk when I didn’t know the trail or the uncertainties that were ahead of me.  Taking excess risk on a mountain bike can literally mean getting lost in the mountains or falling off a narrow trail and ending up with a broken bone.

I also learned that riding up a hill on a mountain bike can be very challenging.  I often started out too fast and ended up walking because I didn’t anticipate the grade or the length of the hill.  Now I know that going slow and steady is much more successful if I want to get to the top sitting on my bike.

You are probably starting to recognize the analogies of mountain biking and investing, and you are right.  You may have some experience as an investor, but if the terrain changes (like a bear market or a recession) you’ll need to know how to adjust.  Road biking and mountain biking require different strategies, just as your investment approach must adapt to current market conditions. Consider:

  • Your investment plan is like a trail map. It will take you where you want to go without unnecessary detours.
  • Having a well thought-out, disciplined investment plan will keep you from applying a road bike strategy when you really need a mountain bike strategy.
  • Follow that investment plan, make the right adjustments and you’ll end up at the destination where you want to be.

Also important is understanding your risk tolerance.  As my mom used to say, “it’s all fun and games until somebody gets hurt!”  Going downhill on a mountain bike is very fun until you crash. And taking on too much risk as an investor feels like the right thing to do until the market takes a downward turn.  Knowing how much of the market’s ups and downs you can take is vital so that you don’t crash and give up on being an investor.

Lastly, there is no easy way to get to the top.  So riding steady, staying on course and following your plan without taking unnecessary risk is the best plan of action for reaching your financial goals, or the end of the mountain bike trail.

When you do that, you can reward yourself with the knowledge you have made good decisions about your investments.  Or, you can visit me in Lake Chelan and we’ll reward ourselves with a glass of wine at one of the beautiful wineries!