It is easy to view the stories of market speculation that have dominated the news recently as cautionary tales for individual investors. However, we can also look at the current moment as an opportunity to welcome a new group of investors to the market: those who have been drawn in by all the high-stakes action, and yet may want a consistent, long-term investment solution that doesn’t keep them up at night.
“el hombre perezoso hace el doble de trabajo.”
You might say this Spanish proverb is about the discouragement of a certain behaviour. In almost every facet of life we are encouraged to give our best and work our hardest. It’s something we see taught in school. When we go through our careers. Maintaining our homes, or if we’re involved in competitive recreational pursuits. Not giving our best will surely have consequences.
You are out walking with your dog near a railway track. Behind you, there is a rumbling noise. Thundering down the track is a trolley, looking up ahead you can see the trolley is headed for a bridge with five workers on it. They will either be run over or jump to certain death. Beside you is a large switch. If you pull the switch, you will divert the trolley to a second track and another bridge. Only this bridge has a single worker on it who would face the same fate as the other workers.
Ask a farmer about average rainfall figures and he is likely to look at you sceptically. Knowing how actual rainfall varies from year to year, farmers will carefully manage their crops and irrigation. It is a lesson many investors could learn as well.
Staying disciplined when markets are volatile is easier once you accept that references to “average” annual returns, like rainfall, can mask a wide range of possible outcomes.
In the aftermath of the 2008 financial crisis a shift occurred in how some older people lived their lives across the USA. For the most part it wasn’t a choice. It was forced. As home prices fell while jobs and savings evaporated, holding onto a house became a struggle. For some it became impossible. The keys to the house were tossed back and replaced with keys to motorhomes and modified vans. Some bristled at the term homeless, they were houseless.