Tweets on 2011-10-19

Found this really interesting analogy between flying and personal finance on Morningstar (emphasis mine):

Let me tell you a story about when I used to be an airline pilot back and in another life. Before 9/11, we could get up and wander back in the cabin and talk to passengers and stretch our legs and stuff, and occasionally the airplane would hit a little turbulence, and the passengers, many of them, would react with a white-knuckle death grip. “Oh my God! This thing is going down.” Whereas, up in the cockpit, the guys are grabbing for their coffee because they don’t want to spill it, and they are absolutely not concerned at all.

Well, the difference is, they’ve got a lot of experience. They understand the airplane is built like a tank, and it’s nothing to worry about for them, but for the passengers, it’s not natural, and we all know it’s not natural to be in a sealed tube more than five miles high, more than 500 miles an hour, while you are bouncing around back there.

So, we try to keep people focused on the idea that this is not an unexpected turbulence. We don’t know when it’s going to happen, but we know it’s going to happen, and the odds are that we’re going to muddle our way through this, because it’s much more political than it is economic, in both our instance here in the U.S. and foreign.

To reach your objectives, you’ve got to stay on board. One good thing about the airplane was people couldn’t bail out, and our job as a financial advisor is to keep people locked in to where they are so that they don’t make a mistake that they may never be able to recover from, because what we’ve seen in the past is when people bailed out at market bottoms they never recovered from that, and it was a disaster for them and their family. So, we want to keep them locked on to, we want to get to the destination all of us together, and this isn’t really so bad. And we’ve gone through a lot of trouble to make a portfolio that immunizes them against the short-term bounces.

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