Investing Tip:

Riding the Luge

One of my favorite true stories, is the one about the reporter who wanted to ride a luge part way down a run to see what it is like. He asked how he should steer it, and he was told not to. That the best thing he could do was to just relax and *not* steer. He thought, "What could be easier?". But he found it that he was wrong. When you are hurtling down toward a curve at 45 miles per hour it very difficult just to sit still. And so he started to try to lean into the curves and steer. And sure enough, he got the luge wiggling on the track and he crashed, but was fortunately unhurt.

Sometimes in investing the hardest thing to do is ride the luge. We see the market going up and down, and think "Oh my gosh, here comes a turn!". And we start trying to steer when no steering is needed. Yes, it's a little scary, but we if let the laws or economics and compounding of interest work for us, like the laws of gravity work with the luge, we'll be ok.

I encourage all investors to ask themselves this question when they are thinking of making a change in their portfolio. Are they doing it because it makes fundamental investment sense? Or are they trying to steer the luge?

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Donald Steinmann and Advanced Financial Management assume no responsibility for any actions taken due to comments made in The Investment Tip of The Week.