How's the View? A Look at Investing Through a Hiker's Lens

If you've ever watched a rock climber clutching the face of a mountain, seemingly suspended in mid air, you've likely had one of two reactions: "Is that person crazy?" or "Imagine how long and hard they trained to reach that point."

Rock climbing, like most sports, takes time to master. Successful climbers know themselves and their limits, set goals to reach the next level — sometimes with the help of ropes, harnesses and other equipment — and understand the risks and rewards. And, of course, master climbers don't start out at the top. The road to success can often begin with gaining confidence out on the hiking trails.

Sound familiar? Like with investing, before setting out, you need to know why you're investing, where you want to get, figure out how to get there and understand your personal risk tolerance.

In the hiking and climbing worlds, routes are often graded from easier to more difficult. Hiking trails, specifically, can send you off on a jaunt of an hour or two, or for days on end. In the quest to continue moving forward as investors, we take a closer look at the investing "trail" to help understand some of your investment choices.

Hike Type: Out for a Stroll

You want to fit a bit of outdoor adventure into your schedule, but want to keep it relatively low-key. Favouring paved walkways or nearby trail paths, you want to ensure you can stay on course. Think of this as generally low-risk territory. With investing, it may be like keeping your investments in cash or cash equivalents, which can offer lower risk and quicker accessibility. Cash investments can include savings accounts, money-market funds and treasury bills. Because they're considered the lowest-risk class for investors, they can also mean lower returns. (And there's a caveat: Cash may be considered safer compared with other investments, but keep in mind its value may not keep up with inflation over the longer-term.)

Hike Type: Heart-Rate Monitoring

You're up for a bit more challenge with this type of outing, and you may be willing to take on a little more uneven terrain while keeping a pulse check. Think of this as taking on a little more risk when it comes to an investment portfolio. Fixed-income investments — which can include guaranteed investment certificates and bonds — might be the equivalent of this kind of hike. Investors typically take on more risk with fixed-income investments than cash, although risk levels can vary depending on the specific investments. Keep in mind the value of bonds typically moves in the opposite direction of stocks. Balancing a portfolio with other investments like equities could offer potential for higher returns over the long-run. It's a bit like the possibility of better views as your hikes take you a little farther and a little higher.

Hike Type: Challenge Yourself

Here's where you're looking to get more out of your hike — maybe it's a more challenging route in the hopes of stunning views. Still, while parts of your hike may feel like familiar territory with flat terrain and smooth trails, elsewhere may involve steeper terrain or uneven footing. Investing in equities might equate here. Compared to cash and fixed-income investments, owning stocks can offer the possibility of stronger longer-term returns. It's important to be comfortable, however, with the idea of fluctuating returns since equities typically fluctuate more in value.

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Reaching the highest point or an extreme distance isn't for all hikers, or investors for that matter. The key is knowing what you're most comfortable with and pushing more only after determining you're ready and willing. Like with hiking, investing is about the level of risk you're willing to take on each part of the journey. That can depend on what stage of life you're in and your investment goals.