There are many casual observers in the investment world that probably think managing money is easy. All you have to do is come up with some sort of strategy that involves a definable technique or asset allocation structure. The next step is to align yourself with like-minded investors who favor your style above the other suitable variants. Then stick to the rules by implementing the strategy in their accounts and everyone is happy.

Sounds easy, right?

The reality is far different from what you would expect. It’s not the strategy that is difficult to implement – it’s making sure that the investors who trust you with their hard earned nest egg don’t lose faith in it at the worst possible time.

This is primarily because you are dealing with a constantly evolving landscape that produces extreme emotional responses in unpredictable ways. Everything looks easy on paper because it’s not the real world.

Ever been standing on a dock before you venture out on an ocean voyage? You can map out your course perfectly using the most advanced tools available. The end result will likely be a straight line from A to B that looks reasonably easy to traverse. But at the end of the day, it’s simply a guide.

You can’t jump in a boat, point it towards a general direction, and expect that you are going to arrive exactly as planned. There is weather to account for, tides to correct, wave patterns to navigate, and human input that requires constant realignment. There is no such thing as a straight course in the open ocean.

The stock market has many of those same characteristics. That’s why it’s so easy to say that the S&P 500 Index has achieved double digit percentage gains over long time frames, but very few investors are able to match those returns. It’s because they make very real mistakes along the way that end up costing them significant sums of money, time, and opportunity.

Let me give you an example.