Don't assume you'll be rescued

It pays to hope for the best but prepare for the worst.

Businessman standing on a desk throwing a lifelife to another sinking in water indicating jobs rescue

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You know you're getting old when you start thinking 'Oh man, we're halfway through January already'.

Yeah. Guilty as charged.

On the positive side, the days are warm, there's cricket on the telly, and life is good, at least for most of us.

Last weekend, I took my young bloke away for a boys fishing trip. He has become a mad-keen fisherman. He also regularly catches more fish than me – something he doesn't fail to remind me.

On Saturday morning, he hooked a massive flathead. I say hooked, and not caught, because he got it up to the surface, but then the bloody thing snapped the line and disappeared.

Yes, a 'one that got away' story. In my defence, it wasn't my fish, and there were other people on the wharf who also saw it!

Fishing offers a multitude of investing analogies. The benefit of patience. Of some days being better than others. Of your fellow anglers bragging about their big wins… and rarely mentioning the bad days (other than the aforementioned 'one that got away' stories…). Of a small outlay for the potential of a larger return.

And a weekend away with kids is a whole other category of investment. Especially without devices.

No, I'm not going to suggest you chuck it all in and go fishing. Or to the cricket.

I mean, you should do those things, sometimes, but if you're of working age and not a trust-fund kid, the bills need to be paid.

I'm actually going to tell you about the previous time we went fishing.

We hired a tinny from the bloke at the wharf and headed off up the creek. Fishing rods, bait, food, drinks, sunscreen. All checked and accounted for.

It was a cracker of a day and we spent the best part of two hours just hanging out (one of my nephews was in the boat with us), talking and fishing.

This time? Not a single bite. But that's fishing.

Then, at the appointed time we started motoring back to the wharf to return the boat.

Until…

Until the engine slowly, but very clearly, lost power.

Then… nothing.

We sat dead in the water.

Bugger.

I looked down at the pair of oars in front of me and prepared for a long row.

And then, salvation.

No, not in an eternal life sense, but almost as good; as I looked up, a Maritime NSW boat was motoring past and noticed we'd stopped.

"Everything okay, mate?" he asked.

I explained, and he very kindly and expertly towed us back to the wharf.

Bullet. Dodged.

The boat hire bloke reckoned there was probably some water in the fuel, but wasn't sure.

What does all this have to do with investing?

Well, as with most of my thoughts, nothing. At least not directly.

But it got me thinking about luck and circumstance.

What were the odds that the Maritime bloke was going to be there literally 30 seconds after the engine conked out?

Astronomical.

The odds of having the engine die in the first place? Not high, but not unprecedented.

The odds of me not catching fish? Pretty bloody high (unfortunately)!

Thing is, I might have caught a fish.

The engine might not have died.

And, if it did, I might have had a long, long row.

Other than thanking my lucky stars (and being glad my office-worker hands would remain blister free!), it made me think about what we take for granted, what we do and don't expect, and how we prepare for circumstance.

We had enough food and water. We had life vests. And, thankfully, those oars.

Not every adventure goes to plan. Sometimes it works out brilliantly. Sometimes it's a minor inconvenience. Other times… well, other times you have to row, and row.

There are a lot of life lessons in that. Sometimes we don't deal well with these sorts of things (the Great Toilet Paper Stampede of 2020, anyone?). Other times, we're in the right place at the right time.

But mostly?

Well mostly (investing lesson ahead!) it pays to hope for the best but prepare for the worst.

To have a Plan B.

To not need everything to work out perfectly for things to go very, very well.

And to not, ever, go back to Square One, because of some failed strategies that, well, failed and took your money with them.

To wit:

Leverage can magnify your gains… or your losses.

Concentration can juice your returns… take everything down together.

Speculation can give you lotto-like wins… or, more probably, lotto-like losses.

I am very, very happy to leave some money on the proverbial table if it means meaningfully reducing the costs of being wrong.

Because investing well means doing the right things, the right way, over a long period of time.

And you only get to benefit from the latter – the incredible compound gains that come with time – if you don't have to start all over again.

Yes, I was lucky to have the Maritime NSW boat motor by at precisely the right time.

But had it not happened, I had the means to get back to the wharf under my own steam.

And, well, we had food just in case we didn't catch anything. Which was far more likely!

In short, we were prepared, and the engine dying wasn't going to be the end of us.

I think that's how we should invest, too.

Have a great weekend – and don't forget to get out there and enjoy this wonderful country if you have the opportunity!

Fool on!

Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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