By Rick Waechter, Founder

My wife and I recently joined a group of her college classmates on a bike trip in Greece. It was a wonderful experience. Anyone interested in combining tourism and biking should check out Vermont Bike Tour’s website, here. After two trips, I am happy to recommend them.

As I pedaled, I could not help but connect the experience to my day job. Here are a few lessons relevant to investing and personal finance – including for people with no interest in biking or Greece.

• Too often, risk is not where you expect it.
  Before I left, friends reminded me to be careful – which I appreciated. The advice, to paraphrase, included “watch out for cars”, “don’t go too fast on the downhills”, and “don’t ride like you’re 25”. I was careful on those fronts. But I didn’t appreciate the risk of stepping on sea urchins in the ocean. Thankfully, it was a relatively painless setback; I only lost half a day of biking. But it reminded me of the difficulty in forecasting where investing risk will appear. A couple years ago no one was worried about inflation and how it might batter stocks and bonds, as it did in 2022. Before that, no one was anticipating a pandemic. The next crisis, I suspect, will come from nowhere obvious. The solutions: diversify broadly, keep plenty of cushion (cash and short-term bonds) and don’t waste your money buying the kind of investment which did well in the last crisis, because the next crisis will probably be quite different.
• Averages can be meaningless.
  Most days, we started and ended at sea level. You might assume the rides were flat. In fact, we climbed about 9,000 ft over the week. Too often, people will look at averages and make investing decisions without understanding the variability around those averages. Over the last century, the US stock market, on average, returned 10% annually. But that average is comprised of 15 years when the market fell by more than 10% and 17 years when it grew by over 30%. When you sign up for stock market investing – or a bike trip to Greece – you need to understand the uphills can be severe. If you give up, you won’t be there for the downhills.
• There’s no substitute for experience … lots of it.
  When we started biking, I could not figure out how to use the gear shifts. That made the uphills brutal (and the downhills impossible to do anything on but coast). I asked our guides repeatedly for instruction. They did what they could to help me, but there’s only one way to really learn: trial and error. That’s because everyone is different. There is no right time to shift for everyone, whether on an uphill or downhill. It depends on your skill, your speed, your bike, your energy level, the terrain, etc., etc. The same is true if you’re going to manage your own finances. You need experience to do it well, and you can’t simply search for the answers on Chat GPT, because the right answer depends on the person’s unique situation.

And finally …

• Perception ≠ reality.
  We often think we understand our financial picture, but too often we don’t. Maybe we don’t really understand how much investing risk we have, or how much we are spending, or how our estate plan will work when we die, or why our tax bill is so high. My riding app informed me that, in aggregate, the uphill elevation I climbed was no more than the downhill descent. My perception was quite different. I concluded that Greece is an odd country: whichever way you go on your bike, it’s entirely uphill.