Do You Change Lanes In Traffic?

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Do You Change Lanes In Traffic?

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January 26, 2014

Several days a week my travels take me from Milton to Buckhead during morning rush hour traffic. If you talk with most Atlantans who live in north Fulton County, they’ll be able to tell you exactly what times to beat the traffic if you are going to drive downtown and when the traffic will subside if you want to wait it out. Otherwise, it is destiny that you’ll be moving bumper to bumper for an hour or so on the journey to downtown Atlanta unless school is out of session.

Being stuck in traffic is a pet peeve amongst all of us. Once your automobile comes to a dead standstill, you’ll begin to notice that when your lane comes to a complete stop that it appears other lanes are moving faster than yours. Once you convince yourself that the lane on the far right is actually moving faster, you’ll begin to squeeze your car over lane by lane until you get in the one that assuredly will get you to your destination quicker. However, once you make the change, inevitably the law of changing lanes takes over and the very lane that you moved out of seems to be moving and now your lane has come to a complete standstill. This is when utter and complete frustration sits in because it always seems that the lane you are in is the one that is moving slowest.

It’s funny, but the phrase ‘asset allocation’ is analogous to sitting in traffic on I-75, I-85, I-285 or GA-400. When it comes to our investments, we can often feel our lane is moving the slowest when we talk to friends or read the news. Because we have real human emotions, if our investment sits in ‘traffic’ stagnanation for too long, we generally uproot our strategy to move over to the lane that is moving faster. Once we get our assets repositioned into the new asset class, then we kick ourselves in the shins when the very asset class lane we were just invested in starts to do well and our new asset class lane gets stuck and goes nowhere.

The whole theory of asset allocation is predicated on the fact that some years some lanes will move slower and other years other lanes will move faster. By strategically positioning your assets into different lanes, you’ll have a smoother ride over the long haul than just putting all of your assets into one lane hoping you’ll beat traffic. Most people chase the investment lane that they think is moving fastest and by the time they get there it is just simply too late.

Remember that the ride to long term goals such as college education and retirement requires patience. Although there are different versions on how to asset allocate your money, it generally isn’t a good idea to be a lane changer or an ambulance watcher. If you want to make a smart money move, make sure your overall portfolio has the right mix of the fast lane and the slow lane so you don’t get stuck in an investment traffic jam that leaves you stranded!

Written by:
Ted Jenkin

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