The stock market is a device for transferring money from the impatient to the patient.
Warren Buffett
I plan on selling my Amazon stock starting in 2045. A bit more in 2046, then 2047, and so on.
The same goes for my Alphabet shares, my Tesla shares, and every other stock I own via diverse mutual funds.
I’ll sell then. Slowly. But I’m not selling now. I’m accumulating now. I’m buying. And I’m staying patient.
That’s why today’s stock market does not affect my feelings.
The S&P 500 is down 5% in the past week. My portfolio, though diversified (US stocks, international stocks, bonds, alts, etc.), is mostly in U.S. stocks. I’m exposed to that 5% drop. On paper, I’ve lost $15,000 in a week.
But only on paper. I still own my shares. Mr. Market and his jabronies feel like those shares are worth 5% less now than a week ago. Fine. That’s their opinion. The market is a “voting machine” in the short run, and they’re voting pessimistically.
But votes aren’t facts. I don’t have to listen to them.
As long as I don’t sell my shares, I haven’t lost anything. Since I’m not selling for another 23 years (at least), I’m betting that my shares will (mostly) recover. They’ll bounce back and grow.
If we zoom out, that’s exactly what tends to happen. History is on my side. Patience pays off.
If you’re holding individual stocks, I feel for you. Some of those individual names won’t recover. Ever. Since 1980, about 40% of stocks have suffered a 70%+ decline from which they never recovered. For Tech and Biotech, that percentage is even higher (about 50% of those stocks). (source)
The point? Stock picking is hard. Trading is hard. It’s trying to find needles in a haystack. Beating the market is possible, but not easy.
Investing, however, is different than trading. Investing is not stock picking. Investing is a long-term bet on widespread growth. I’m buying today—planting seeds—that I might sell in 20, 30, 40+ years. Those seeds will mostly grow. If I’m patient. That’s my bet.
The other farmers are worried because their seeds might not perform well this year. Impatience!! But the harvests I’m worried about are decades away. And there’s plenty of time until then.
Trees that are slow to grow bear the best fruit.
Molière
If this past week’s stock market has you concerned, ask yourself:
- Are you stock picking? Or investing?
- Is there a reason for you to sell your investments now, in 2022? Or can you wait for an eventual recovery? Do you need to harvest right now?
- Have you zoomed out? Think in decades, not weeks.
- Where do you fall on the scale of impatience to patience?
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-Jesse
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Exactly so, I’m down over six figures for that same week and I am in the selling phase of life. No worries though, it will be back in no time, and I’m way up from when I retired six years ago.
As your portfolio grows these swings get bigger and the dollar value can seem wild at times. It’s all on how to frame your mindset looking at the numbers. With the down swings I like to ignore the dollar values and focus on the number of shares I own.
Exellent post! I particularly like your JesseLand explanation for Terra/Luna. Bummer so many people got burned. I used to be a BTC Minner back in 2013-2015 but got out for a lot of the reasons you pointed out.
One thing I’d point out. You stated that 19% interest was paid so JesseBucks wouldn’t leave the park. The way I see it is the eco system didn’t want JesseBucks turned in for USD. The longer they get you to hold JesseBucks the more USD they can collect.
And I hear you on the $15K swings, you get used to it after a while 🙂
Hey Adam, thank you! I appreciate your kind words. That’s a good point about the 19% interest. I hadn’t thought of it that way, but your explanation makes a lot of sense.