I recently met a very successful businessman who was voicing concern over the lack of diversification of his investment assets. He was fully aware of the deficiency in his financial plan, but every time he decided to move some of his money to stocks, an uneasy feeling induced him to postpone. Many people have experienced a similar hesitation, and rather than embark on a tired explanation of the potential benefits of stock ownership, I would instead like to share a simple story.
If you have ever had the chance to watch the famous cliff divers of Acapulco, you know the courage it takes to dive 100 feet into the ocean waters. Believe it or not, as the divers prepare to take the plunge, they are not thinking about the distance from the cliff to the water. Instead they are focused on the dangerously fluctuating tide range of the coves. As the tide rolls in, the water reaches depths of over 12 feet. After crashing along the rock wall, the tide retreats leaving depths of water as low as 3 feet.
The average onlooker may not perceive the risks as the water ebbs and flows, but to a cliff diver, timing can mean the difference between a successful dive and death. Perhaps you have already ascertained the point of this metaphor, but I ask you to imagine yourself for a moment as the cliff diver. From your vantage high above, you look down at the tides moving swiftly in and out trying to choose the ideal moment. You feel most confident when the water is high, but do you dive then when you know it will be shallow by the time you land? Or do you jump when it looks shallow because you know that the incoming tide will be there to catch you?
The courageous cliff diver provides a model for the successful investor.
Jumping when things seem safe on the surface can often be more dangerous than taking the leap when every bone in your body is telling you there isn’t enough water below. Wisdom is knowing to look to the incoming tide when timing your jump while everyone else is dreadfully focused on the shallow depths left behind by the outgoing one.