What Can Fishing Teach Us About Investing?

Dear Readers,

You know my dad is an avid investor. But did you know he's also an avid fly fisherman? He used to take me fishing and really tried to get me hooked. (Pun intended!) I have to admit I wasn't a natural. It seemed kind of slow and tying the knots was a real challenge. Investing, of course, was a different story. When my dad introduced me to stocks, dare I say I went for it hook, line and sinker?

Now, you may understandably be wondering why I bring up fishing. Well, as I see it, there are a lot of lessons from fishing that can apply to investing. So whether you're a seasoned investor or a newbie just ready to get your feet wet, I think you'll find some of these lessons interesting, fun—maybe even inspiring.

You first have to put your line in the water

Whether you want to catch a fish or build your wealth, if you sit and wait for the right conditions before casting your line, chances are nothing will happen. So don't just think about it, get invested. It doesn't have to be a big commitment. You can start by staying close to shore with just a small investment. Once you get used to the water—and the market—you can decide to go in a little deeper.

It helps if you fish in the right pond

When my kids were little my dad took them fishing in a stocked pond. Of course they always caught something and felt like winners. Obviously that's not going to happen with investing, but you can increase your odds of success by choosing low-cost investments that match your goals and feelings about risk. Do some research before you start investing so you're more confident that you're putting your money in the right place.

Cast a wide net

Fishing in a single spot or investing in a single stock can dramatically decrease your results. Sure you might get lucky, but the best bet for an investor is casting your net over a wide range of investments. Fortunately, mutual funds and exchange-traded funds (ETFs) make it easy to create a diversified portfolio. For instance, a new investor with a long time horizon could get started with a broad-based index stock mutual fund or ETF.

Want to increase your odds of success even more? Diversify internationally and across different asset classes (stocks, bonds, cash, commodities), sectors and industries.

Patience is part of the process

I admit I didn't have much patience when it came to fishing. I wanted to make a catch and be done. Instant gratification. Well, if you're an angler, you know that's not how it works. And that's certainly not how it works in investing.

Being patient and taking a long-term view is essential. Getting in and out of the market quickly or overreacting to market volatility is a mistake. As they say, time in the market is more important than timing the market.

So think about how long you can keep your money invested. Money you'll need in the next 3-5 years generally shouldn't be invested in stocks. It's money for long-term goals like retirement that's most suited for stock investing. But it's not just putting the money in the market, it's keeping it there. That's where patience comes in—and compounding pays off.

Be prepared—and prepare for surprises

Successful fishing requires the right gear and tackle. The same holds for investing. Of course, you need the right accounts and the right types of investments for you, but there's more. And what about a map so you know where you're headed? An overall financial plan that includes budgeting, saving, insurance, and debt control are all part of the map that will get you safely to your financial goals.

But just like a change in the wind or weather can take you by surprise, an unexpected health issue or job change can throw you off course. An emergency fund of three to six months’ cash to cover essential expenses can help keep you afloat until a financial storm passes.

Get help tying those knots

Whether you're a beginning investor or wading into riskier investment waters, you'll feel more confident if you have someone to help you. My dad was my investing guide when I got started. In the same way, an experienced friend or family member may be able to give you a few pointers. If you really want help untangling some of the more complex aspects of investing, check in with a financial advisor. Even a one-time consultation can keep you from getting in over your head.

Here's one more comparison I think is relevant: Investing, like fishing, is filled with stories about the one that got away. But you won't have any stories to share if you don't give it a try. So if you're thinking about investing, I say cast your line now!

Have a personal finance question? Email us at askcarrie@schwab.com. Carrie cannot respond to questions directly, but your topic may be considered for a future article. For Schwab account questions and general inquiries, contact Schwab.