What Jumping Out of an Airplane Taught Me About Investing

I served 24 years in the United States Air Force and was fortunate enough to have a lot of amazing life experiences during that time. Among those was the opportunity to jump out of perfectly good airplanes hundreds of times over the years. As with many things in life, there are usually lessons to be learned from our experiences that can be carried over into other aspects of life. Here are a few things jumping out of an airplane taught me about investing.

Embrace Uncertainty

We face a lot of uncertainly in life, and choosing to jump out of an airplane only serves to increase that feeling. I had always dreamed of attending the U.S. Army Airborne and Military Freefall Schools. However, when the aircraft door opens on the very first jump, it’s easy to start forgetting why you wanted to jump out of an airplane in the first place. In some cases, people refuse to jump and deprive themselves of an awesome experience.

Investors constantly face uncertainty as they strive to achieve their financial goals. War in Ukraine, global pandemic, and high inflation are just a few things they have faced recently. These types of events can challenge your tolerance for investment risks. However, capital markets have prevailed through many such occurrences. It’s important to stay the course in order to realize your goals.

Embracing uncertainty is an inherent part of skydiving and investing. If you allow fear to control your behavior, you may be more likely to make poor decisions or avoid doing the things necessary to realize your dreams. Having wise counsel can help you embrace uncertainty, and your Foster Group advisor is here to walk alongside you in that journey.

Diversify Risk

In most cases, you jump out of an airplane with two parachutes. Your “main” parachute and your “reserve” parachute. Those who’ve had to use a reserve parachute understand how important it is to diversify risk because when it comes to jumping, diversification can literally save your life. I still remember a night jump over the Nevada desert when one of our jumpers had a main parachute that didn’t open. Had his risk not been diversified, he wouldn’t be here today.

For investors, diversification can help reduce your portfolio’s risk, so no single sector, stock, or asset class impacts the entire portfolio in the same way at the same time. With a well-diversified portfolio, you may win over the long run by increasing your risk-adjusted return.

At Foster Group, we help you invest in low-expense, globally diversified portfolios tailored to your needs.

Time Matters

My very first skydive was a tandem jump where two people are connected. Soon after jumping out of the airplane our drogue chute (small parachute to stabilize and slow you down) wrapped around us as it was deployed. It was a bad situation that could have had catastrophic consequences. As jumpers frequently say, we had “the rest of our airborne life to figure it out.” Fortunately for us, we were over 2 miles above the earth’s surface, and we had time to clear the malfunction well before we were in danger of impacting the ground. Had we been closer to the ground, the circumstances would have been much different. Time matters.

For the investor, the more time one has, the more risk one can bear. It’s why someone in their 20s may have a higher allocation to stocks than someone entering retirement. When the time horizon for use of assets is shorter, it’s prudent to bear less risk.

At Foster Group we will help you find the appropriate investment allocation to meet your investment goals. We will help strike the right balance between growth and preservation assets.

If you’d like help embracing uncertainty, diversifying risk, and fitting your investments to your given time horizon, give us a call.