Donuts and Airplanes
When I think back to the 6th grade, I don’t recall much anything that I was taught in the classroom. There are however, two memories that have left an indelible mark on my childhood, “Donut Tuesdays” and the recess “Paper airplane challenge”.
Tuesdays meant we our school would offer giant homemade donuts during snack time for the economical price of just fifty cents. Although the price tag may have seemed “economical” to the teachers, fifty cents might as well have been $100 dollars to this (then) twelve-year-old kid.
The only answer to my lack of donut money came in the form of our elementary school’s illustrious paper airplane challenges. Held only at recess, the illustrious challenge involved crafting a paper airplane that, when thrown, traveled farther and faster than any other! The victor was promised a glorious donut, (free of charge!) the following Tuesday!
As soon as the mid-morning recess bell would ring, we, the eager participants, would run three stories up to the highest floor of our campus building with our precious handmade airplanes in tow. Once situated atop the chosen perch, one by one, we would launch our meticulously handcrafted masterpieces watching and waiting as they sailed through the sky.
Each week presented a variety of paper airplane designs and as such, there was always a different winner. Once in awhile a kid would make a paper airplane that was so special, it would win for two and sometimes four weeks in a row. Free donuts for a month!
The only thing that all of our airplanes had in common was the certainty that no matter how far or fast our planes were, at some point, every single one would land on the ground.
As many of you know and have heard me say, I do not predict the short-term behavior of the Investment markets. Instead, I rely on longer-term capital market assumptions that can change depending on valuation of markets. My process is such due to my belief that it is generally easier to make long-term predictions about the Investment markets than it is to do short-term ones.
Asset classes, (US Stocks, International Stocks, Bonds and the like) operate similarly to a paper airplane. An investor has an idea of a long-term interval (the airplane will land on the ground), but cannot predict the short-term periods in between. We may not know how far, how fast or how high it will go, we know one thing with absolute certainty; eventually on some unknown flight path, at an unknown time, at an unknown location the paper airplane will hit the ground.
Therefore, understanding the concept of the long-term outcome, an Investor, depending on their time horizon, should invest in the asset classes with the best possible long-term returns.
In hindsight, I may have actually learned a thing or two in the 6th the grade. The inevitability of the paper airplane landing on the ground forced me to organize and communicate while considering the bigger picture. Conversely, the one time I actually won the airplane challenge taught me that huge sugary donuts are not as good for lunch as I had thought they would be. Hey, you live and learn!