Last week, after seeing one too many negative headlines on war and the economy, and surviving one too many Ontario winter snowstorms, four buddies and I decided to take a vacation, fly to Guadeloupe in the Caribbean and charter a sail boat as a means of at least partial escape. My work partners weren’t happy because for some reason the markets always experience wild gyrations whenever I decide to take the occasional holiday. Of course, last week was no exception. My colleagues hate my holidays.

Of course, markets don’t take vacations. With modern technology I had full cell coverage so I could still keep up on all the latest developments, even in the middle of the deep blue Caribbean Sea. Cell coverage, in fact, was probably better than it is in Ontario.

I did my best to take a break, but still ended up with five insights on how sailing and the market and investments actually have some things in common. Bear with me, this was not a sun-soaked fever dream.

Get expert advice (a captain)

In the investment world, financial advisors often get a bad rap for the fees they charge clients. But if you do not know what you are doing, it is far better to pay someone to guide your investments so that you do not bankrupt yourself. It is well worth paying for a smart adviser for an inexperienced investor. In sailing, I have only sailed a few times in my life. I have no idea how it all works. If I had been the captain of our yacht — the Luna Rossa — it would surely be at the bottom of the Sea now. So, we got an expert. Luckily, our good friend Rob is an experienced, licensed captain, so we didn’t even have to pay him (except in beer). Our week experienced some very intense winds and we were extremely glad to have some expertise guiding our ship.

Get insurance (whether for market declines or for your boat)

Insurance

also gets a bad rap in the investment world. But it can be quite helpful in many different client scenarios. For investors, insurance can be against financial collapses (such as gold) or insurance against market declines (such as uncorrelated assets, short selling or put options). Having some insurance can calm investors, knowing they have at least some protection from market winds. In sailing, we picked up a $1.5 million boat to rent for the week. None of us wanted life-altering debt, so insurance on the boat was an easy expense that we were glad to pay. Sailing is a little nicer without a giant possible expense riding on your back.

Diversify (whether your portfolio or your sailing devices)

In investments, everyone should know the benefits of diversification. Owning different stocks, in different sectors and in different countries, can balance out market swings. It is one of the key tenets of investing, of course. On a boat, Captain Rob assured me that a sailboat has diversification as well. As a rookie sailor, I saw a hodge-podge of ropes, winches, buckles, flaps and sails (don’t ask me to name them) that somehow seemed to work together to get us from port to port. Everything I saw seemed vital. But the captain assured me that the boat could lose its motor and most of its sails and still get us home safely. There is some back-up in case there are problems.

Sometimes things get choppy (ride the waves to get the payoff)

Investors know that markets often experience problems: volatility; corrections and, yes, even crashes. But over time, markets have performed exceptionally well, despite all the problems that seem to continually haunt the headlines. There is a payoff at the end of all the problems. The same is true in sailing. In Guadeloupe, we experienced five hours of the choppiest chop one could possibly imagine. My beginner-sailor brain had a flashback to the movie

The Perfect Storm

. It was rough. Even the Captain looked a little green. But then, the payoff: a quiet, secluded perfect anchor port with a blue sky, gorgeous sunset and amazing dinner. But we had to ride the waves to get there.

Contrarian moves (going the opposite way to get to your destination)

In the

stock market

, investors often need to go against the crowd when investing. Buy when everyone is selling, trim when confidence is running high. Value investors know that a cheap stock can soar, under the right conditions. Going the opposite way from the crowd can be lonely, but can also be profitable. In sailing, everyone knows that sometimes you need to head into the wind to move forward. Close-hauled means sails are trimmed tight and the boat points high upwind, and you can still move forward. Tacking is zig-zagging in order to progress upwind. If your destination is upwind, you have no choice except to go against the wind and tack repeatedly to get to where you are going.

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Peter Hodson, CFA, is founder of 5i Research Inc., an independent investment research network helping do-it-yourself investors reach their investment goals. He is also portfolio manager for the i2i Long/Short U.S. Equity Fund. (5i Research staff do not own Canadian stocks. i2i Long/Short Fund may own non-Canadian stocks mentioned.)

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