Most things that are worthwhile are a struggle.
If you want to become great at an instrument, you’re going to have to practice a lot. Yo-Yo Ma, the cello supervirtuoso, practices about 2,000 hours per year.
If you want to become a great athlete, you’re going to have to put in lots of time training and take care of your body. Hello, broccoli!
If you want to become a great coder, you’re going to have to put your hours in behind the keyboard.
But this is good news because sitting in front of a TV doesn’t make humans happy. Overcoming adversity does, even if your version of struggle is squatting 500 pounds. We learn and grow when we struggle. And when it’s over, we’re happier.
The times where I’ve grown the most have come from willingly putting myself in uncomfortable situations. Training for and running a half-marathon was one of the hardest things I’ve ever done, but my resting heart rate was never so low. Volunteering to speak in public was incredibly difficult, but now I’m a better, more confident person.
We gain knowledge and strength when we venture outside of our comfort zones. Voluntary discomfort is good.
Successful Investing Is Another Struggle
The black swan has arrived and its name is Coronavirus. On 2/19, my net worth hit an all-time high of $2,585,215. Last Friday, it was down to $2,443,857 for a loss of $141,358.
An older version of me would have been going crazy over these losses. On the surface, the thought of losing $141,000 in a couple of weeks is terrifying. But, after two decades of thinking about investing, downward swings don’t bother me at all. Here are my best tips for dealing with Mr. Market when he is unhappy:
- Mentally prepare yourself when the sun is shining: The time to plan for the storm is when the weather is good. Just like a prenuptial agreement, formulate your plan when times are good and your brain isn’t consumed by worry. Part of your plan may be having a couple of years of cash set aside to ride out rough times.
- Know that this is natural: In the short-term, stocks are volatile. Trying to predict these moves is gambling. Over the long-term, factors like population growth and productivity gains create economic growth which leads to appreciation:
Top: Last Friday. Bottom: Last 10 years.
- Envision yourself 10 years from now: Whenever something is bothering me, I ask whether it will matter in a year from now. The answer is almost always No. Same with markets. If your time horizon is long-term (and it should be), you probably won’t remember much about the Coronavirus by 2030.
- Don’t stop investing: Warren Buffett once said something like: “The stock market is the only store where people head for the exits when everything is on sale.” If you’re a long-term investor in the accumulation phase, you should be happy when stocks go down.
- Compared to the worst-case scenario, this isn’t so bad: After a long battle with cancer, a family acquaintance died last week. He was 46, the same age as me and leaves behind a wife and young child. If the main thing you worried about last week was the stock market, life is probably still pretty good.
It’s Not That Bad. Yet.
For all of the folks in a tizzy about the markets, consider that the S&P 500 is back to where it was in mid-October, about four and a half months ago.
Not much to see here.
But, maybe you’re saying this:
What if the Coronavirus hits America hard! Stocks could go down 30% or more!!
Sure, that may happen. School may be canceled for a month or longer. Businesses will suffer as workers and shoppers stay home. It will be a tough couple of quarters for the economy.
But then, the virus will go away. Life will pick back up and humans will move on too. Mr. Market will recover as he always has.
The Struggle Is Real, But Also Profitable
Morgan Housel tweeted this last week:
Napoleon’s definition of a military genius:
— Morgan Housel (@morganhousel) February 28, 2020
“The man who can do the average thing when everyone else around him is losing his mind.”
Same in investing, especially weeks like this.
So, keep doing the average thing. Keep putting money into your 401(k) or whatever you normally invest in. Know that you’re getting a discount because of a flash sale.
The world will return to normal soon enough and stocks will follow.
At some point, another black swan will show up and shake the world up a bit. But that will pass too.
In the meantime, embrace the discomfort. You’ll be wealthier for it.
And wash your &*%!ing hands!
Join the 10s who have signed up already!
Subscribing will improve your life in incredible ways*.
*Only if your life is pretty bad to begin with.
Panic is never a good strategy, fear is never a good motivator. It’s gonna be a fun ride, buckle up!
Dave @ Accidental FIRE recently posted…T.G.I.F. Friday: Volume 11
Hmmmmm, sounds like a t-shirt idea…
I second that. Lots of different meanings.
So true. Knowledge is the slayer of fear. So, I educated myself on investing. Therefore, I am now like Joe Rogan used to say to all the contestants at the end of Fear Factor, “I guess fear is not a factor for you.” Just keep calm and carry on.
Greenbacks Magnet recently posted…Why You Should Always Trust But Verify
Yep! I’ve just let all the chatter pass me by. I’m not going to touch these investments for another 30 years or so. Plenty of time for Mr. Market to come roaring back!
Gwen @ Fiery Millennials recently posted…Monthly Status Report: January 2020
perspective is a wonderful thing. we had a crappy month with kidney stones(not pictured), a car crash, and all this market gyration but it’s still a pretty good darned month in the grand scheme. i do like having a cash pile and morgan housel has interesting observations on cash not being trash. it helps a person sleep well at night even if you have to work an extra 22 days in your career.
freddy smidlap recently posted…Seeya later, February. I’ll Miss You Like a Hemorrhoid!
I thought the “Yo-Yo- Ma” reference was going to be related to the market yo-yo gyrations! 🙂 Up strong today 3/2, but I don’t believe it’s gonna stick. We need to see “viral activity” stabilize. Go back and wash up again please…
Yeah, I think it’s a dead cat bounce powered by the expectation of a rate cut.
One would think that eventually the media hype would numb everyone. The fear of death or losing money keeps everyone watching the news. Not sure which one makes us watch more.
SWFL Financial Coaching recently posted…The Easiest is not Always the Best
I particularly like that quote from Napoleon. It’s so true that those that can keep their heads during times of panic will reap the rewards.
Good luck to you Carl!
Mr. Tako recently posted…Stock Sell-offs, Pandemics, And A Black Swan
I too like the Napoleon quote! I once did a blog post on The Count of Monte Cristo and Napoleon said, “In this life we are either kings or pawns, emperors or fools.” – Napoleon Bonaparte
I understood what Napoleon meant by average. Basically, keeping it simple. “There is brilliance in simplicity.” – Bruce Lee
Greenbacks Magnet recently posted…Rejecting Buying New Cars Has Made Me Richer
Thank you, well written!
I invest for income and my income increased last week due to adding some shares 🙂
I figure there are two possible outcomes:
1. Sooner or later the market goes back up and keeps going up, like it has after every panic over the last century or two.
2. COVID-19 (or nuclear war, or alien invasion, or global warming, or runaway nanotech AI) renders the stock market the least of our worries.
Can’t do much about option 2. So let’s keep shoveling money into option 1!
Yeah, I’ve had the same thought! All or nothing, 1 or 0. Go big because if it goes bad, there are much bigger things to worry about!
“Everyone has a plan until they get punched in in the face.” Mike Tyson
So we all just got punched in the face. This is a great time to see how your plan works.
1) Do you now what your cash flow needs are? Monthly, Annually?
2) Do you have at least 3 years of cash flow available in cash to access?
3) If so you get a cookie.
4) If not you just got punched in the face. Sequence of returns risk will destroy most plans. If you have cash to cover and allow dividends to replenish the cash you are going to be fine. If not its time to start building up cash to cover your expenses and ride out the storm.
No cash, but I have a really good passive (for me anyway) income streak; a spouse that works!
That’s a good one! But you know they say it’s not how many times you get knocked down, it’s how many times you get back up.
“I don’t worry. I don’t doubt. I’m daring. I’m a rebel”. – Mr. T
Greenbacks Magnet recently posted…Don’t Let The Coronavirus Stop You From Investing
Carl,
Timely post and I agree with the take-home message. May I kindly disagree with the idea that this is a black swan event? I think “correction” makes more sense at this point. It’s just too early to tell (for the virus or the market). Disease outbreaks happen periodically and most Americans don’t even take severe flu seasons seriously. The unknown and not understanding risk creates fear. I agree that we should all just carry on! Dollar cost average, eat well, exercise and wash one’s hands! Keep up the good work.
Dr. Medimentary
Medimentary recently posted…Is Intermittent Fasting Something We Should Be Doing Continuously?
Hi Medimentary, nice to hear from you! I was referring to COVID-19 as the black swan. But maybe it’s not even the virus that’s the black swan, but the way the media has covered it and the fear it’s created?
Hope to see you in Longmont soon!
If it hurts too much to see the absolute value drop in times like this, then people probably shouldn’t be watching their net worth on the ride up either. Just keep pouring the money into the market regularly and go do something else and know that the dip doesn’t matter. If you have a plan and believe in the fundamentals of the stock market then there is nothing to worry about.
Just like Adam said in the other comment, can’t do anything about option 2 so keep shoveling money into number 1!
…and yes, just wash your hands. This is really everyday advice.
“Just keep pouring the money into the market regularly and go do something else and know that the dip doesn’t matter.”
Yep! And the best part is that you’re buying at a discount!
Maybe we should all invest in hand sanitizer and toilet paper companies 😉 they seem to be selling off the shelves. But in all seriousness what companies do you think will benefit from a year of this? Maybe companies that have more diverse supply chains, food delivery and remote work companies?
Wow, that’s an interesting question. So far, it’s been Costco!
Maybe companies that make personal hygiene products?
Since the virus and the fear will pass, I’m going to be adding more money than planned to the index holdings.
Well done. Regarding “wash your hands”…Houston has an Iconic piece of graffitti on a rail bridge that crosses I-45 southbound just before it heads into downtown that for decades has read “BE SOMEONE”. This week, it changed to WASH UR HANDS.
Financial Velociraptor recently posted…Sometimes the best trade is no trade
I remember reading about Malcolm Gladwell’s 10,000 hours of practice to become an expert at anything. I now know why Yo-Yo Ma is so successful after you shared the fact that he practices 2,000 hours a year. Wow! That’s dedication.
I too have learned that when you step out of your comfort zone great things happen! I took a public speaking class at Georgetown based on advice I read about taking acting classes to become more confident when speaking to groups of people.
I still invest in Mr. Market as to be successful at anything consistency is key. It took years to build my portfolio to $100k and now it seems to do most of the heavy lifting for me.
Greenbacks Magnet recently posted…How Buying Super Bowl Tickets Could Cost You $2 Million Dollars
It’s not the financial aspect as much as the health outcome that bothers me. Luckily I’ve been following this since December and stocked up with oximeter and all as per my own list.
I’ve seen governments and organizations act in an incompetent manner except Singapore
You still down quite well, comparing the broader S&P500 market by loosing only 5.7% Major recession is coming.
The challenge for financial independent people without income is that dividends will likely to be zero or very low for a lot of companies. If S&P500 used to bring 2% it will be under 1%, meaning that people need to sell their assets to maintain income.
Corona-virus after escaping a laboratory is not per say a black swan, I would imagine. There will be many more of them. What curious is how fragile the global economy is. This is one of the major downsides of the globalisation (apart from spread of deadly virus).
I just got back from Italy this weekend. They are in trouble already. So much of their economy relies on tourism and the numbers are way down. The busiest place I was at the entire trip was the Sistine Chapel and I still had a good 6-8 foot radius around me of personal space. At the David, we were able to walk around for 30 minutes without anyone within 10 feet of us.
Everyone we talked to who live there (our tour guide in Tuscany, the cab drivers and the restaurant owners) were all talking about how bad it is and their fears of how much worse it is going to be. But now I am back home and following the CDC’s recommendation of 14 days of “social distancing.” Glad I work from home and continue to make money, but I know there are people that this isn’t possible.
I’m down over the last couple of weeks $300K. No big deal. If it hurts you to see numbers move around on your phone or laptop screen then you shouldn’t be looking. I find it interesting when its up or down. I really don’t care which with a zero withdrawal rate, hobbies alone bring in more than we spend. But it is a good lesson for younger advisors, if it will drop another 30% it would be a great lesson!
Wow. Lots of horror stories coming out of Italy. Scary.
I hope you’re doing OK now.
march 12th, how are things now?
It doesn’t matter to the long-term investor.
“In the meantime, embrace the discomfort. You’ll be wealthier for it.”
Definitely embracing the discomfort over here: )
Take care,
Max
Thank you for sharing!
Your patience is the turning point for success. I always learn from you