“Half the skill of being educated is learning what you can ignore” – Kevin Kelly
I have to admit. I had a blast writing the previous blog post about the remedies for rising inflation, my first new post in quite a long time. As the world continues to move forward toward more and more uncertainty, I hope the essence of this blog continues to hold up no matter what economic challenges await us.
One of my favorite roles to play in life is an investment therapist to those I care about. I remember during the early days of the pandemic I was on a walk with my dog and got a call from a family member who I had helped become a badass index fund investor.
Since 2017 he has held his investments at Wealthfront, a robo-advisor. He contributes automatically into his low-cost diversified investment account twice per month and understands the best approach for his financial future is to allow the stock market to do whatever it’s going to do, without getting involved in it.
It was June of 2020. He was telling me that he doesn’t normally pay attention to the financial news, but with all the uncertainty surrounding the pandemic and the turbulence of the stock market, it had him very worried and asked me what he should do.
The reality was, despite the fact that I am invested in the stock market, I had not looked at its performance in many months so I had no idea what it had been doing.
I didn’t tell him this, but I did tell him to take a deep breath and reminded him that we don’t care what happens to the stock market during the short term because we know that every storm in its history has passed and the stock market has been incredibly resilient over the past century-plus despite everything the world has thrown its way.
I was able to help calm him down and regain his badass confidence in continuing his investing journey. Mission accomplished.
When I got home from the walk I decided to see what all the fuss was about. To my surprise, I discovered that the stock market had plunged -34% and then recovered almost all of its losses, all in the previous 4 months.
I had no idea. It was a strange feeling. I’m supposed to be a knowledgeable investor. It was as if I had slept through all the financial turmoil, all the fear, all the news, all the stock market drama because I wasn’t paying attention to it.
But did I really miss anything at all?
One thing we can be damn sure of as investors is that there are infinitely more storms ahead on our journey. And during some of these storms, people will tell you “but this time is different”.
Covid felt different. It probably should have been different. No one had ever experienced anything like that in our lifetimes and it was devastating in many ways. But from an investing perspective it was just a little speed bump on the stock market’s steep and relentless rise over the long term.
Who knows. Maybe one of these storms eventually will be the one to permanently sink the stock market. I’m sure the Roman Empire thought their civilization would last for eternity. I have no idea what will ultimately happen with ours.
But history has shown us again and again, through The Great Depression, two devastating world wars, another in Vietnam, another in Korea, in Iraq and Afghanistan, the dot com bubble, the attacks on September 11th, The Great Recession, a once in a lifetime pandemic, an insurrection on our Capitol and periods of brutal inflation. Through all of this and so much more, the stock market has been a tremendous wealth building tool for those brave enough to stay in it for the long haul.
Investing has its risks, but so does not investing. Inflation has shown us that. I am willing to put my financial risk in something as historically resilient as the stock market.
So if you can accept that there are many more storms ahead, then you can safely bring your awareness and energy to much more useful things instead of emotionally attaching yourself to the ups and downs of every “scary” wave that comes our way. You can instead live your life and let your investments compound and grow over time. It doesn’t need you monitoring it. It’s better off if you don’t.
Jack Bogle, founder of Vanguard and inventor of the index fund famously said, “Don’t peek. When you retire, open the statement and believe me if you’ve been putting money in there for 40 or 50 years, you’ll need a cardiologist standing by you when you open it.”
I gave myself and my relative a gift by purposely ignoring the financial news at the start of the pandemic. And I believe there is a tremendous psychological and financial benefit in learning to do that for yourself.
The Personal Finance Playbook 