Do you remember, whenever you travel by air, the cabin crew taking you through the safety instructions? They religiously provide you safety instructions irrespective whether you know or not, whether you pay attention or not? This is part of their operating guidelines.
What do they tell us every time we board the flight?
- To wear a safety belt
- In case of turbulence, get back to seats and wear safety belt
- In case of less oxygen, how oxygen mask will help
- In case of emergency landing, how to use emergency exits and reach to safe place.
Now you must be thinking why am I talking about airline safety instructions here. How is it related to investments and financial planning?
Here I go to relate these safety instructions which will help us even in financial planning and investments.
Wear a Safety belt: Safety belt is to ensure that you are intact. It is an indication that flying is risky but by taking precautions, we reach the destination faster than the other modes of transport. Similarly, in investing, wearing a safety belt means choosing right asset allocation plan and sticking to it.
You choose your goals, time in hand and the appropriate plan and lock the belt.
This means, if you choose to build emergency funds, don’t get excited with equity markets and jump into equity funds without building emergency funds. If you have any of your goals within next 5 years, don’t choose equity over short term debt funds or fixed deposits. Wear the seat belt appropriately and stay there depending on the goal.
In case of turbulence, get back to seats & wear safety belt:
While in mid-air, if the plane is in turbulence, all that you have to do is get back to seat and wear a safety belt. You don’t have option to get out of the air-craft right? This is applicable even for investments. When either debt / equity markets are in turbulence, why get off from it? All that we have to do is just get back to seat and wear safety belt and sit tight. Why take decisions which are hazardous for our financial health. Stick to asset allocation as per your Goals.
In case of less oxygen, oxygen masks will drop and help you breathe:
Here in air-crafts, oxygen masks are fit which will automatically drop to you when there is less oxygen. In case of investments, when your investments are in trouble, the only oxygen mask that works is patience, time and asset allocation. If your asset allocation is fixed, any turbulence / lack of oxygen can be handled with no hassle.
In case of emergency landing, how to use emergency exits and reach to safe place:
In case of extreme emergencies, the cabin crew will help us reaching out to emergency exits and reach to a safer place. They understand when and how that has to be done, similarly in investment journey also, leave the decision of emergency exits to experts, who will be able to guide and walk you through the emergency (if at all it happens). Let not your fear guide you to emergency exit.
Final note on how I relate to airline safety to investment is have a solid asset allocation plan; when in trouble, sit tight and leave emergency exit decisions to experts.
Have a safe investment journey and enjoy!!