Content provided by Kostya Etus, CLS Associate Portfolio Manager

Kostya SF Bike ride

I recently took a trip to the beautiful city of San Francisco. Relative to Omaha, it is quite large and definitely has no shortage of fun things to do and see. Some of the highlights from my trip were riding the trolley, eating great seafood, and seeing a major league grand slam. But my favorite activity was actually a bit more strenuous: riding a bicycle across the Golden Gate Bridge.

Cycling the bridge was easy; getting there was the hard part. As you may know, San Francisco is known for its hilly terrain, which is hard enough to walk, let alone ride a bike through. But as I trudged along, I started thinking about investing. There were many different types of cyclists on the road. Some were moving very fast and were tiring quickly. Others were very cautious and weren’t really getting anywhere.

The faster cyclists reminded me of aggressive investors who allocate all their funds to high-risk investments trying to get rich quick. This strategy may be appropriate in some situations, but it also may result in a crash (financial crisis) where much time (money) is lost. Likewise, an aggressive investor may need to stop to take a breather, such as moving funds to cash and missing out on a potential market rebound.

The slow cyclists are the more conservative investors who allocate all their funds to low-risk investments. This may be appropriate for those near retirement but may result in slow growth and the inability to reach investment goals over long periods of time (don’t forget about the power of compounding).

I personally took the moderate approach. In order to achieve a consistent speed and maintain my stamina, I made good use of the bicycle gears to work smarter−not harder−and I never had to stop. This moderate approach is the essence of globally diversified, asset allocated portfolios built for the long term. The utilization of gears is relatable to risk management and the ability to adapt under changing market environments (one of the main benefits of risk budgeting). This strategy keeps investors balanced and makes sure they stay invested.

Using this approach, I was able to get to my destination with plenty of strength and time to cross the bridge. The bridge itself was fairly flat, and it was quite relaxing to cycle across and enjoy the views. The bridge was my retirement, and I felt great as I started to cross because I knew I made the right choices on my way there. Hopefully you are able to take away some of these insights to help get you safely across that golden bridge of life.

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