By: David Baskin
May 22, 2015

Last weekend I had my first good sail of the year. Lake Ontario is still very cold and the wind off the water made me keep a wool hat on and my jacket zipped up. Out past the end of the Leslie Street spit I pretty much had the lake to myself.  Sailing alone gives me time to think with no distractions but the wind and the sound of the water slapping the hull.  Not surprisingly, I was thinking about investing, and how it is like sailing.

You can only sail in the wind there is. You might want it to be stronger or weaker or from another direction, but you learn very quickly that there is nothing you can do about it.  In the investing business, the market is much the same. You have to take it as you find it.  Markets do what they do, and nobody can tell what they will do next.  Sailors learn to get from where they are to where they want to be, regardless of conditions. Sometimes it takes longer. Often the ride is bumpy and downright unpleasant. So be it. That’s the price you pay for the great days when every moment is a joy and you feel, temporarily, like the master of the wind and the water.  Of course you are not. The weather doesn’t care about you. It doesn’t even know you are there. Just like the markets. They don’t care what you bought or when you bought it. You are not the master. Learn to live with it, or stay away.

When you watch an experienced sailor steer you will see that the wheel appears to be motionless. Movements are subtle, infrequent and planned in advance. The good sailor knows that every turn of the wheel makes the rudder alter the flow of the water, cause friction, and slow down the boat.  Much better to set a course and stick to it, and to the extent possible, avoid fiddling. The same is true of really good investors. The investment equivalent of over-steering is over-trading. Every trade causes friction in the form of commissions and taxes. Those extra trades don’t get you where you are trying to go any faster; mostly they indicate you didn’t think hard enough before buying in the first place.

Finally, since I often sail alone, I live by the maxim that there are old sailors and bold sailors, but few old, bold sailors.  Sailing on the edge is exhilarating, even thrilling, but it comes at a cost. Things break. People can get hurt, even killed. Some are willing to pay that price for the excitement. Some investors are the same way. They like to speculate and are prepared to see lots of money go down the tubes as they search for the elusive 10 bagger. Good luck to them, I say. That’s just not how I do it.

The name of my boat is Safe Returns.