Built for Turbulence

Add comment March 19th, 2008

   Thomas A. Muldowney, MSFS, ChFC, CLU, CFP®, CRC, CMP®, AIF® 

Many of you reading this missive have done some traveling.  Whatever the trip, you want to get to your destination, safely.  Some of you will travel by air.  All travel is safer in this modern age, but air travel is particularly safe.   

As you are rolling down the tarmac, before you take off, the flight attendant will say, “in the event that something bad happens, the airbags will fall out of the ceiling.  Place the airbag over your face and breathe normally.”  Now I have to be honest with you, if I have to place a bag over my face, it’s going to be really hard to ‘breathe normally!’ 

But, the modern day airplane is engineered to handle “in flight” stress.  For example the landing gear can support the plane, hold together and land it upright…even when it lands at 440 feet per second, fully loaded.   While not in flight, the wings sag.  But in order to gain the lift necessary to go airborne, the wings, at the tips, rise several feet 

On almost every flight, you are likely to encounter turbulence.  Turbulence only counts for about 10% or so of the time that you’ll spend in the air but it is scary, it may make you sick and when you land you’ll probably say…’I’m glad that’s over.’ 

The volatility in the marketplace today shows up in your portfolio…kind of like air turbulence.    Remember, you cannot get from here to there without traveling.  Today, I met with Mike. Mike was particularly anxious about the volatility in the marketplace. Among a variety of questions, he wanted to know if the market volatility was going to last forever.   

Interestingly, Mike is an airline pilot with one of the major airlines.  After a particular turbulent flight, I asked Mike “Aren’t you pilots trained to handle turbulence?”  “Sure” he said.  “Wherever possible we avoid the turbulence.  But, since it is not always possible to ‘see’ the weather, occasionally, you’ll find your self in a pocket of turbulence.  The first priority is to navigate through the turbulence, safely.  Another primary safety issue  for the passengers…make sure the passengers are safe while traveling and that they arrive at their destination safely.” 

That’s why the pilot will tell you to go back to your seat and buckle your seatbelt…It will keep you from hurting yourself.  

If you are on a plane and it encounters turbulence…you might become a bit frightened.  But, you probably won’t ask for a parachute or try to change planes in mid-flight. Even if you tried, you’d be told to sit down and buckle up – for your safety! Get it?  For your safety. 

Of course, a well diversified portfolio should be designed to handle the turbulence of the market.  It won’t stop it, but it is designed for safety.  Now, what do you think that you should do regarding the turbulence in the financial markets?  Go ahead…it’s OK to ask.