By Jerry Wagner At this time of the year, 20% to 25% of Americans endure watery eyes, sneezing, congestion, and headaches. And pollen is the cause. When the first irritating signs of hay fever hit me this year, I started researching. And that’s when I noticed the following five similarities between allergies and investing (I know it seems like a stretch, but bear with me): 1. When does it become important? While allergies can start in childhood and adolescence, studies show that the greatest number of people begin to suffer symptoms of hay fever between the ages of 20 and 30. The same period is extremely important for investors. Start young and let the compounding continue for as many years as possible. Yet, despite all of the focus on the benefits of long-term investing, there is likely to be much more at stake for older investors. They tend to have more money at risk, and their time is limited with retirement looming. When we are in our 50s tends to be the period when we focus on that last bit of accumulation—building our nest egg as much as possible to carry us through the retirement years. Once in retirement, we are more likely to be focused on distribution as we live off our investments. While the focus for older investors may be accumulation first and distribution second, there is an even more pressing motivator: preservation. Our retirement dollars are the dollars we have to live on for the rest of our lives! 2. Seasonality Spring is when pollen begins to wreak havoc on our eyes and nasal passages. Here in the Midwest, it’s tree pollen in the spring, grass pollen in late summer, and weed pollen in early fall. Investing is like a seasonal allergy, and the difficult season is the same. Back in April, you probably heard the saying, “Sell in May and go away!” Just like with the pollen seasons, spring and summer tend to be the worst time for investors. Of course, as an active investment manager, I like to think of it more as “Begin in May, and find a way.” Usually, when there is a dull market in one asset class, there is a growing asset class somewhere else. While a buy-and-hold investor has to hold on (and may have to grab a tissue), a dynamic risk manager can seek gains elsewhere. 3. Whose fault is it? It’s not the pollen’s fault. Allergies are caused by your body’s production of histamine. When pollen enters the body of an allergy sufferer, it triggers the production of histamine, which then creates an inflammation of the nose and throat, along with all of the other nasty symptoms. Similarly, it’s not the markets’ fault when investors suffer painful losses. As the large body of research on behavioral finance has demonstrated, human behavior creates most of the difficulties. Our avoidance of loss, sense of inertia, herding instinct, and the overemphasis on recent events causes us to overreact—similar to an overproduction of histamine—in a counterproductive manner. Buy-and-hold investing that relies on the markets to slowly carry us higher with no decision-making is one strategy to deal with this. We believe a better method, and one that is supported by behavioral finance research, is to use system-based, quantitative methodologies that take subjectivity, bias, and emotion out of the investment decision. This approach seeks to ride the market higher and avoid the bulk of the market losses that cause so much investor pain. Migraine headaches can be brought on by the confluence of many allergies: seasonal, food, environmental. Similarly, those painful bouts of investment losses can cause a permanent allergy to the very asset classes that investors need most, such as stocks, gold, and even bonds when interest rates and inflation soar. 4. Treatment is better than doing nothing Fortunately, science has provided many answers to our allergy woes. I now have a standing order in the spring for prescription eye drops that help me manage the pollen onslaught. And non-drowsy antihistamines are essential to survival in this season. For me, in the world of investing, active management and strategic diversification have been the treatment of choice. Back in the 1970s, I pledged that I would no longer subject myself or my investment portfolio to the 20%-plus declines that have historically and regularly occurred. Instead, I would actively manage my investments and those of my clients in a systematic manner to avoid emotional bias and debilitating losses. 5. An ounce of prevention is worth a pound of cure Of course, treatment after the symptoms start is helpful when it comes to allergies. And for years that was about all a hay fever sufferer could do. Then allergists started to treat the allergies before they caused the symptoms. At first that involved immunology, giving allergy sufferers a small portion of the substances they were allergic to—tree pollen, for example—over a long period to build up their tolerance level. In recent years, doctors have turned to prescribing symptom treaters well in advance of the hay fever season. Antihistamines and corticosteroid nasal sprays can block histamine receptors, reducing potential inflammation. “A lot of people who wait end up suffering longer and on even more medication for a longer period of time,” said Dr. Laura Mechanic , chief of allergy at New York’s White Plains Hospital. It’s the same with investing. If you wait until the onslaught of a bear market to do something about it, whatever action you take will be less effective. Like with most things in life, preparing for a bad event in advance tends to lessen its impact when it finally occurs. As I have pointed out many times over the years, neither listening to the talking heads on the various financial shows nor reading the experts in the press is likely to provide an effective investing approach. Their track record is atrocious. Similarly, investing by the seat of your pants rarely succeeds. Research service Dalbar annually releases the results of a study of investor behavior drawn from thousands of investor statements. While the results vary, Dalbar’s news release reports that this year’s study found that “the average equity fund investor earned more than 10% less than the S&P 500 (18.39% vs. 28.71%), which marked the 3rd largest underperformance ever observed by the QAIB study, which looks back to 1985.” For more about the pitfalls of DIY investing, see our recent article here . Flexible Plan Investments offers an alternative, with more than 100 dynamic, risk-managed strategies and investment profiles. Each one follows a tested methodology that is systematically programmed into our computers and applied without emotional bias. As with allergies, preparing before the symptoms start can reduce investor suffering. Waiting means you’ll have to guess when to start the medication and, importantly, when to end it. Better to prepare ahead of time.