How to Catch an Investment Wave'? Get in the Water!

At the beginning of the summer, I always start singing (or humming) some Beach Boys song as my own personal soundtrack to this glorious and seemingly carefree season. The song “Catch a Wave” has particular significance – not because I’m a surfer, but because one of my investing mentors once used surfing as analogy for me.

As he liked to explain, surfing requires a good measure of patience, perseverance, skill and luck. It also requires action – you can’t decide which wave to catch while you’re standing on the beach, holding your board. By the time you make your choice and race into the water, that wave will have either crashed down upon you or passed on to shore. In order to catch a wave, you have to pursue it. You must already be in the water, paddling, watching for opportunities. You might miss a couple before you catch the perfect wave to find yourself “sitting on top of the world,” as the Beach Boys ditty goes.

Investing Also Requires Action

Like surfing, investing is a dynamic activity. If you try to time your entry from the sidelines, you run the risk of either missing the wave, chasing it endlessly or perhaps worse – being crushed by it.

Allow Me Some Latitude with this Analogy . . .

  • Your board is your ballast, the investment ‘core’ or foundation that you hold onto while you await a good wave. It should contain a diversified mix of instruments that are in line with your risk parameters to help generate, grow and sustain income over time.* A professional financial advisor can help you make those choices.
  • Your buoyancy is assisted by the mild paddling you do to float atop the water. This represents the monies you either add or reinvest as part of your ongoing investing activity.
  • The waves are the outside forces that drive the valuations of these instruments – and your ‘core’ – higher and lower, depending on the moods of the economy and the markets.

Oceans, like investing markets, have changing moods and tides. As the saying goes, ‘a rising tide lifts all boats.’ The same has been said about good financial markets. But if you are in the water long enough with the proper ‘board’ (diversified ballast), you have the opportunity to catch a wave!

So, remember to take action. Take yourself – your “Little Deuce Coupe” – to the beach and try to “Catch a Wave!”

*Diversification does not guarantee a profit or protect against losses in a declining market.

© Pioneer Investments

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