While eating a breakfast burrito (when all the best ideas strike), I was lamenting my inability to convince the world of the importance of staying in their stock investments even when the value is going down. People SAY they can handle volatility, but when a little thing like a pandemic or election comes along, their ACTIONS indicate otherwise. Investors go to mostly cash to wait out the bad times. They only want to be in the stock market when it’s growing.
I can, and repeatedly have, spouted statistics and charts to explain why being out of the stock market on the good days is so much more damaging than staying in through the bad days. Clearly the numbers aren’t doing the trick. So, how about equating your reactions to stock market swoons to your other relationships?
Your relationship to the stock market: I love you when you are going up and am positive that I can handle your short-term drops because I know in my brain that the stock market rises over long periods of time. However, I don’t want experience those drops, so when bad news hits I will put my money in cash until you are going up in a predictable, consistent way.
Your relationship with money is not just numbers. Like other ties in your life, it’s emotional. What if the actions you take with your investments were the same as all of your relationships?
Your relationship with your kids:
I love you forever. You are my child, and I am your parent, and nothing can break that bond. However, I am going to step far away from you in the situations where you whiny, sick, scared, need therapy, experiment with drugs, are learning to drive, are sulky with me, have a bad haircut, or annoy me in any way. Only when you are kind, giving endless hugs, funny, thoughtful, do your chores without me asking, making straight As at school, earning a six-figure income, or generally bringing me joy will I be present in your life.
Your relationship with your dog:
You are my favorite companion and I smile whenever I see you. However, I am NOT your person when you need walking during a snowstorm, need to go to the vet because you ate an oven mitt, your poop needs scooping, you bark too much, or you need porcupine quills removed from your snout. I am only your loving person when you are healthy, quiet, playful at convenient times, and sleep when I sleep.
And the most fraught, your marriage.
Imagine if every time you felt disappointed, angry, confused, or upset with your life partner you “went to cash” aka, left the relationship. If people only stayed with their spouse when they were in good spirits, in good health, agreed with our every opinion, shared every hobby, and generally felt butterflies every time you were in the room together, there would be SO many divorces. Okay so there are SO many divorces, but there would never be any golden anniversaries.
The point is, try to see your relationship with your investments more like other connections in life. If you don’t stick it out through the bad times, you won’t be there when the good times unexpectedly happen. Be present through thick and thin. That’s where the rewards are.