A Less than Linear Path
by Zach Marsh on Oct 25, 2019
So I stepped on the scale this morning and immediately my mood collapsed. I’d gained one pound since yesterday. Normally this shouldn’t be a big deal, but now I’m in a competition with a friend to see who can reach his target weight soonest. One pound is now a big deal. Prior to entering this contest I had not weighed myself in over 8 months and, while I was periodically unhappy with my gut, the comings and goings of my weight concerned me little. I was in happy, ignorant bliss. But everything changed when I decided to start focusing on it. Now I’m obsessed by the digits on the scale. And over the past week I’ve noticed that it is starting to affect my mood, which is stupid, I know, but who says we are always rational creatures.
Deep down I know progress is choppy. There are ups and there are downs. But, damnit, emotionally I want linear progression. I want my life graph to resemble a hockey stick, always moving up and to the right. Well, in the case of my weight loss, down and to the right. The emotional attachment to linear progression, spawned from our natural instincts to anchor ourselves to highwater marks, is part of what makes investing difficult, and financial planning a painful process at times. We all want to see our investment accounts marching methodically, never pausing and never retreating, like the advancing enemy forces in the Lord of the Rings the Two Towers. But unfortunately that never seems to be the case. The stock market’s movement is too random to expect linear progression.
As I climbed off the scale, sulked and walked to the shower, I reminded myself that 3 of the richest men, in the last 30 years, experienced dramatic pullbacks, or long pauses, on their paths to riches. From 1980-2001, Steve Jobs, of Apple fame, saw his net worth decline by over 65% on four separate occasions as Apple stock made large retracements from highwater marks. Jeff Bezos, from 2000-2002 saw the value of his Amazon stock, and his entire worth, decline over 95%, before the stock began a meteoric rise, making him the richest man in the world. Even Bill Gates had to “suffer” through 17 years where the price of Microsoft stock, ex-dividends, went absolutely nowhere.
While most of us would gladly exchange bank accounts with Messrs. Gates or Bezos, I’m not sure how many of us could’ve tolerated the fluctuations they experienced, or the lack of progress they went through during long stretches of their careers. Certainly, most of us investing for retirement or using our investment accounts to currently fund their retirement cannot stand the drawdowns that these titans have withstood. But, unfortunately, we all must endure them on a smaller scale in order to achieve our financial goals. Low interest rates in the new millennium have made it next to impossible to fund a risk-free retirement plan, and there appears no sign of that changing soon. So, in order to adequately fund our goals, most of us are going to have to endure the fluctuations that stock market investing entail. Even if it means that sometimes we have to walk, sulking to the showers.
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