Pep Talk for the Hard Times

In case you needed to be reminded what it felt like to see your account balance go down, now you likely have recent, first-hand experience.

These are times when a motivational speech is likely more appropriate than a technical lecture.

When, if necessary, not logging into your account is more impactful than any tweak you could make.

When reflecting on what we’re aiming for is more appropriate than adding up the current score.

When a hug is more appropriate than a slap on the back.

When patience is more necessary than sophistication.

Alas these types of drawdowns are not only inevitable, but necessary for long term growth. Failure sowing the seeds of progress.

As Morgan Housel puts it, “Returns are never free. They demand you pay a price, like any other product. And since market returns can be not just great but sensational over time, the fee is high. Declines, crashes, panics, manias, recessions, depressions.”

The sneaky part about investment returns is that the “price” they demand isn’t showing up on a label – it shows up in the form of sleepless nights, impulsive slashing of spending, second-guessing your own investments when you hear a friend describe theirs, higher blood pressure when you follow the news, fear that your investments won’t stop dropping until they hit $0, etc.

These are times when it is easy to forget that the “markets” are not a slot machine but instead are a group of real businesses run by real people showing up every day to add value to this uncertain world that we live in – figuring out how to operate in a post-COVID world, dealing with supply chains upended by a war in Ukraine, trying to add value to the world despite experiencing higher costs, worldwide leadership that is turning over to a subsequent generation, and on and on.

Like exercise or dieting or relationships, timing and magnitude of effort do not always match up with immediate results.

I have found that it is helpful for me to remember that building resilience will always beat grasping for certainty.

When it comes to investing, resilience looks like…

Investing in a manner that you believe in and in which you have a baseline understanding knowing that, regardless of strategy or plan, the only guarantees are that someone will always outperform you and that how you behave during the inevitable unsettling times will be the biggest determining factor in your lifetime returns. Owning companies tends to increase potential returns, diversification tends to make the ride smoother, long horizons tend to increase the probability of positive returns, and above-average patience is a superpower.

Have hope. Stay the course. Don’t process this alone. Find someone and talk to them about how you’re feeling right now. That will be more powerful than anything else you can do.

Additional Reading

Behavior versus everything else by Carl Richards
Reminder that “how you behave matters more than what you know”.

Days or decades: What’s it going to be? by Carl Richards
Halftime speech because maybe that is what you need right now.

A Market Update for Real Investors by Morgan Housel
Timeless, humorous, and a helpful reminder that effort and results are not perfectly correlated.

Selloffs Through History by Ross Mayfield
Historical context because this has happened before and will happen again.