People do it all the time.
In the face of their worst imaginable fears, they do it. Probably not because they want to. They do it, maybe, because that’s the way we humans are wired.
What do they do?
And the only thing that might be driving them is a faith in the future. A faith that the future will be better.
Faith is a requirement for living any sort of good life. Without it, the slightest wobble in your world will send you tumbling. And our world is full of wobbles.
We must have faith that the future will continue to bring better things.
And I know this isn’t an easy thing. We’ve all been tested.
Think of the darkest moment in the darkest time of your life and you’ll likely recall something peculiar. You kept moving forward.
I know I did. My darkest time was probably when my fiancée broke up with me. Of course, now looking back I realize what a favor she did for me – but that wasn’t my feeling at the time.
I was living and working in San Francisco after moving there from Texas. She was back in Texas and I had spent most of my free time focused on our relationship, either through travel or tons of hours on the phone.
So, when she broke it off, not only was I crushed emotionally, but I didn’t have a network of friends locally to lean on. I hadn’t invested the time to create that network. My focus was elsewhere – where I thought it should have been. Boy was I wrong.
I recall those days (or maybe weeks) afterwards drifting through my workday. In fact, work was my only distraction for a time.
In San Francisco, I walked to the office very early in the morning and drifting through the empty streets certainly didn’t help my attitude or sense of self.
But I did it. And eventually, things got better.
I don’t recall what it was, but at some point, I must have laughed at something. I must have felt some sort of joy come back into my world, even if it was fleeting at first.
I didn’t consciously look for it, but I knew – somehow – deep down that things would get better.
I probably couldn’t have admitted it at the time and certainly wouldn’t have used these words, but I had faith in the future.
And my faith was proven true.
Success For the Long-Run
This is the attitude we must have when we invest successfully for the long-run.
We often can’t see how things can possibly get better and yet we must hold on to the idea that they will.
You see, stocks, taken as a whole, go up over time. They go up because the economy grows and it has been growing since the beginning of time.
Now, there is no way to know what stocks will do over the next day, week, month or even year. But if we look out far enough, we can begin to form an expectation we can have some confidence in.
Over 30-year periods of time, stocks seem to return between 8 and 15%. Over a single day’s period of time, they can return between -21% and + 16%.
It’s pretty amazing to think that something that can move that broadly in a single day would have such a narrow range over longer periods of time. But that’s exactly what the data tell us.
So, we must have faith.
Why Should We Have This Faith?
My Investment Philosophy, in short, is this:
- Humans are hard-wired to interact with each other and this grows over time
- Companies enable and stand in between these interactions, earning a profit on each one
- Therefore, we want to own all companies around the world to benefit from this permanent nature of humanity
Our faith is based on our understanding of human beings at their most fundamental level.
What, Exactly, Should We Have Faith In?
We should have faith in two things. First, faith that our humanity will continue to require interactions with each other. Whether this comes from a religious or non-religious point of view, it is hard to deny that this has been the case in the past.
And our desire to connect grows and grows. Just think of the travel your grandparents experienced. And then think of the travel your parents experienced. And finally the travel you have experienced and the travel you desire in the future.
Connection is our addiction and we are not looking for a way out of it.
Also, we must have faith that public companies will continue to be incentivized to enable and create these interactions. Perhaps this is a faith in capitalism – I’m not sure, because I’m not sure how you might define capitalism. And besides, it doesn’t matter.
What matters is that companies retain a motivation for profit and you retain an ability to access that profit through stock ownership.
…But, This Time Is Different!
The above occurs to all of us (even me) when market crashes come. And for good reason.
It is always different this time. Because it has to be.
Mark Twain is credited with saying “If a cat sits on a hot stove, that cat won’t sit on a hot stove again. That cat won’t sit on a cold stove either.”
We cannot suffer a market crash for the same reason that caused a previous market crash. It’s not possible because if the same things start happening, people will remember the last crash and will trade out of the markets sooner, creating a smoother drop than before.
Crashes occur unexpectedly, by definition. Therefore, the cause of each crash must be different than the cause of any previous crash.
Yes, it is always different.
But our human drive to connect never changes, and it always wins out. Even in the face of COVID-19, we are all itching to get out and reconnect with one another. It’s simply part of our human nature.
What Gets In The Way
Unfortunately, there are forces at work that profit greatly when we make changes to our portfolio. And the best way to get people to make changes to their portfolio is to scare them.
Who are these forces? Wall Street and the financial media.
Wall Street is built on transaction costs. Even in today’s near-zero trade fee environment, huge fees are made from underwriting new issues which require you to make a change in your portfolio to buy them.
The Wall Streeters that make the most money are the ones who can convince the masses to do something, whether it’s good for them or not.
The Financial Media is no different. With at least four 24 hour financial news stations and an untold number of newspapers and magazines, the push for you to “do something” is almost unbearable.
If you don’t “do something” in your portfolio with some frequency, you’ll soon realize you have no need for these media outlets.
And what’s the best way to get you to do something? To scare you.
So that’s really their main job. To inject you with so much fear that you can’t stand it until you make some change in your portfolio – whether it’s for your benefit or not.
Both of these institutions are downright shameful.
Here’s The Good News
Once you have faith in the future, you are ready for a long-term investment strategy that is diversified and provides the right support for your plan.
Further, you can now view your portfolio in a much narrower capacity: how it supports your Financial Plan.
No longer are you trying to “win” at the stock market. You are not trying to “outperform,” whatever that means.
No. You are simply using the markets to grow your wealth so you can do what you want in life.
The goal is to live your Best Financial Life by funding your lifelong Spending Plans using a fact in human nature that cannot be reversed.
Now that’s something to have faith in!
Do you have questions about how to protect yourself during this challenging time, or if you’re even making the right moves? I’m here to help. Click here to schedule your FREE 30-minute discovery call and let’s talk