FEATURE — The weather this week has reminded me of a time I took off from El Paso on a hot August day. It was 115 degrees when I climbed into my plane at the little Texas airfield. There was smoke in the air from local fires and the southwest heat wave was in full swing. As I closed the door of my steaming hot plane, the last thing I wanted on that day was a mechanical problem. All I wanted was to get that airplane up into the nice cool air high above me.
After completing my various checklists, I headed down the runway, anxious to put some altitude between myself and that searing heat. As the plane accelerated down the runway, I followed standard pilot procedure and called out the takeoff checklist, “Fuel rate 24 gph, engine instruments in the green, airspeed alive…..” Wait, the airspeed was showing zero. Immediately I cut power and aborted the takeoff.
As I taxied back toward the shop, sweating profusely, all kinds of unpleasant scenarios played out in my mind. At a small, burning hot airport far from home and with business to get back to, I wondered what fate and costs awaited me. Soon a smiling mechanic who had heard my abort call was standing by my plane. I assumed he was smiling because he knew I had no choice but to pay whatever he asked, as he was the only shop on the field.
Without even a word, he pulled out a pair of pliers and began to unscrew the tip of my pitot tube – a small cigar-shaped device that is mounted to the front of the wing. Air flowing into a tiny hole in the front of the pitot tube calculates the plane’s airspeed, which, as you can imagine, is critical to a safe flight.
He carefully shook the tube over his hand and smiled as he showed me the very tiny round bug that had fallen out. The critter was no bigger than a grain of sand. “Those little guys sure like that cool hideout on these hot days,” he said. “You are the fourth one this week.”
Without any charge, he happily waved me back on my way. I marveled all the way home how, despite everything I did to keep my plane in top shape, the tiniest of bugs had almost grounded me.
Investors have their own checklists that they work through.
They consider wars, riots, interest rates, elections, recessions and other major headlines. They maintain what often amounts to a worry list of all the big concerns the markets face each day. In the process of fretting over so many big issues, they sometimes fail to realize that it is often the little things that can cause the greatest hurt to a portfolio. It is said to not strain at gnats, but with investors, and with airplanes, those tiny gnats can cause a great deal of trouble.
Here are a few of the financial gnats that are often overlooked: Hidden, excessive, or duplicative account fees; not cutting losses soon enough; not capturing gains when prudent; not doing timely reallocations; failing to do, or not understanding, tax harvesting; position overlap; risk creep (a commonly missed problem) and sector concentration. These are just some of those annoying little gnats that can get into your financial system and cause dramatic effects over time. Like the bug in my pitot tube these seemingly little things can get overlooked in efforts to worry about bigger items. But failing to account for them can be costly to investors.
After that El Paso trip my pre-flight checklist got a little longer that it used to be. I know I won’t catch everything, but I am looking a lot closer for those pesky bugs that can make my life difficult. A regular financial pre-flight inspection should be just as thorough. We don’t want to strain at gnats while we swallow camels but ironically, it is often the overlooked gnats that can cause investors the most grief.
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