Lessons From Surfing the Deadliest Wave in the World

Editor's note: Investing is never without risk... so you need to be prepared. Today, we're continuing our holiday series of timeless wisdom from our editors. In this piece, which we last shared in June 2023, our colleague Chris Igou explains how preparing for the perils of the market can sometimes look a lot like preparing to surf a deadly wave.

Also, the markets and our offices will be closed tomorrow for New Year's Day. We'll return to our usual schedule on Friday, January 2. Enjoy the holiday!

Professional surfer Jamie O'Brien broke his leg surfing this wave... twice.

Lifeguards had to bring Kalani Chapman back to life after he fell unconscious at the same spot. And these are two of the best to ever surf there in history.

Banzai Pipeline is off the coast of Oahu's North Shore in Hawaii. It's the deadliest place to surf in the world for a reason...

Waves get as high as 20 feet, and a shallow reef below the water makes surfing even more dangerous. A plaque at the entrance to the beach honors those who have died. Since 1987, Pipeline has taken at least seven lives.

It's not to be taken lightly. So when I decided I was going to surf there in early 2023, I knew I had to be ready...

I've been surfing for more than 20 years. I've surfed in Costa Rica, Indonesia, Nicaragua, California, and more. But I had never surfed in Hawaii.

That's why I broke down the most important factors for surfing there before I went. I knew that minimizing those risks would help me stay safe in the world's deadliest wave.

Today, I'll walk you through how I did it... and how you can apply the same ideas in your investing.

Pipeline has three main factors to consider... the crowd, the reef below, and how heavy the wave gets.

Let's start with the crowd. People flood Hawaii in the winter to try and catch the best waves of their lives. The window for swell is between November and April, with December through February being the peak season.

The World Surf League runs its famous Pipeline Masters competition in January or February to make sure they have a good chance of waves. And the largest crowds come between November and February. It's when locals, pro surfers, and amateurs fill the lineup... with 150 to 200 people on a crowded day.

I wanted no part of the zoo for my first time out. So I went at the start of March. That's when the surf tour leaves, along with many other tourists. But you're still in season for big swells.

The second factor I had to prepare for was the reef. The wave breaks on a reef that has holes in certain places.

If you get stuck in one of those holes, you could be in big trouble pretty quickly. And again, it's a shallow reef. The wave breaks in just about 4 feet of water.

So to prepare, I did two things. First, I took a surfing helmet to protect my head. This wasn't common in the 2000s. But guys like Jamie O'Brien are wearing them these days.

Then, I swam the reef on a flat day before the swell arrived. Snorkeling gave me the chance to spot the holes in the reef, know where they would be relative to the wave, and identify where the most dangerous parts were.

The last thing I needed to do was prepare for how heavy the wave was going to be. It could hold me underwater for minutes if I had a serious hold-down (the time underwater after a wipeout). And having the stamina to take those beatings is important.

I spent more than two months training. I did breathing exercises and worked out five days a week.

So I took control of everything I could to prepare. Here's one wave from my trip...

The waves didn't get as big as the iconic Pipeline is known for. But I still got to push myself in surfing bigger waves at one of the scariest locations on the planet.

I wouldn't have been able to do that if I didn't minimize the risk ahead of time. And by breaking my approach down into three factors, I was able to execute my plan.

Three Steps for Minimizing Stock Market Risk

Again, the markets are the same way. Folks can lose everything if they don't prepare.

This is why we recommend using trailing stops... avoiding the crowd... and making sure you always have your plan in place before you make a trade.

Trailing stops limit your downside risk so you can't wipe yourself out. A general rule is to use a 25% stop. If the stock you own falls 25% from its recent high, sell immediately... no questions asked.

You will take some losses from time to time. But by cutting them short, you live to trade another day. And over time, your big winners will outweigh your losers.

Avoiding the crowd means being a contrarian... If everyone is "all in" on a stock or asset, that often leads to a reversal in price. And if the crowd is extremely bearish, a new uptrend is likely to arrive.

Last, always write down your plan before you invest. It doesn't have to be elaborate. You want to write down why you're making the trade. You want to know what your timeline is... Are you investing for years, or is it just a six-month trade? Finally, write down your exit strategy in case the trade doesn't go your way.

Each of these steps can help you minimize risk. And you'll be able to reap the rewards in the long run by following them.

Investing might not be life or death. But it can still be dangerous. By sticking with these simple ideas, you can set yourself up for success.

Good investing,

Chris Igou