From time-to-time, a reader sends me a good investing analogy that I want to share. The following was sent to me by Deephaven insurance agent Pete Giancola. Send your own to kmcguire@startribune.com or add them to the blog via the comment feature.

Investors are like the pony express riders. There were successful ones and not so successful ones

The Pony express went from St. Louis, MO to Sacramento, CA. delivering the mail. How many of those riders ever rode the exact same horse the entire way?

None. All of the riders brought three other horses with them so when one horse got tired the rider changed to a fresh horse that could keep the rider going towards Sacramento and eventually to their goal. They assessed all of their needs and the different environments along the way and adjusted accordingly. They decided which path to take, they decided which horse to ride and they brought spares to change to if the horse they were riding got tired along the way.

How many investors are just like the rider that tries to ride the exact same horse the entire way? They find themselves in the desert with a horse that is laying on the ground pouring water on the horse hoping it will get up again so that they continue to their destination. They rarely look at their portfolio, they rarely look at the asset classes they own, they rarely care about their financial well being, but they definitely want to be standing in Sacramento (retirement).

Investors should be bringing along their spares to be able to continue their journey while constantly re-assessing what their needs are to get to their destination. Situations change.

This entry was posted on Tuesday, December 30th, 2008 at 6:00 am and is filed under investing. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.