Winter is arriving and that presents new challenges for pilots. On the positive side, the terrible summer turbulence will be gone. I won’t have my family complaining about the rough afternoon approaches into my desert airport. I love flying in the heavy, cool winter air where the engine can breathe better, the air is smoother, and the wings generate more lift, making for easier take-offs.
On the downside, the northern Jetstream will be finding its way down into the lower 48 states. A Jetstream is a mostly narrow, meandering band of air that circles the globe in a west to east pattern. The speed varies significantly depending on altitude but where I fly at 27,000 feet, it is very common to see it travelling at over 100 mph. In a plane that does 300 mph, it can take a big bite out of your groundspeed when heading west, although it feels great when you are eastbound. Unfortunately, the laws of wind-math work against all pilots.
A headwind will hurt you more than a tailwind can help you. Despite what seems logical, a round trip flight is not a wash when it comes to winds. As an example, a 200-mph plane with a 190-mph tailwind, would move across the ground at nearly double its normal speed. But when it turns around to go home into that 190-mph headwind, it would actually only be travelling 10 mph across the ground. That would be a long trip.
The headwind principle applies to many other areas of life. Bad things can happen quickly, but then take a much longer time to correct. This is especially true in investing. For investors it works like this. If your account suffers a 20% loss in a bad market, it takes a 25% gain to get back to where you started. If you suffer a 50% loss, as many did in 2008, then you need to gain 100% just to get back to even. Market losses measured in percentages, like headwinds, hurt you more than the same market gains will help you.
As a pilot in the winter it is not uncommon to take a route that is less direct, in order to avoid the headwinds of the Jetstream. You find yourself travelling farther, but the time to your destination can actually be faster. As an investor it is equally important to avoid headwinds, or losses. Taking what might appear to be a slightly longer route because it is less risky, may actually get you to your destination more quickly if that route helps you avoid significant losses along the way.
When you look at expected investment returns, don’t focus solely on the biggest numbers but also pay attention to the volatility you might incur while attempting to hit those numbers. Like headwinds to a pilot, a market loss can hurt you more than tomorrows market tailwinds may help you, so it’s best to plan your retirement trip accordingly.
Hi, I'm Dan. I'm a CFP® Professional.
Securities and advisory services offered through Commonwealth Financial Network®.
Member www.finra.org / www.sipc.org , a Registered Investment Advisor. Wyson Financial, 375 E Riverside Dr, St. George, UT 84790
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