Sooooo apparently, the market crashed last week. I had no idea, because I was in the middle of my reservist training. Yep, I was sweating it out in an ulu camp in Pasir Ris, with no clue about what was happening in the outside world.
Which is kiiiiind of like what my investing style is like.
Unlike most of my fellow financial bloggers who know what’s going on in the world economy, I’m pretty clueless most of the time. This week, my “financial influencer” WhatsApp group (yeah, it’s a thing) was buzzing with exciting commentary about China, Malaysia and interest rates. But I was too busy figuring out which combat ration I eat for dinner – glutinous porridge with ground nuts, or Indian style spicy noodles with chicken sausage?
(yeah, I like eating combat rations. I’m weird like that.)
So while I was in the middle of the jungle staring up at the night sky, it struck me how my investing strategy – index investing – parallels my reservist experience. Let me count the ways:
Your Discomfort Is Temporary
A funny thing about reservist – it’s like getting into a time machine. One week, you’re in a comfy, air-conditioned corporate office. The next, you’re in the middle of the Lim Chu Kang training area sweating through your camouflage face paint and trying to swat off a horde of commando mosquitoes.
But you know that no matter how uncomfortable it might get, it’ll eventually be over. Sooner or later, you’ll return to your comfy office life and look back fondly at the times when you were charging up some hill, running on pure adrenaline and 4 hours of sleep.
In the same way, good investing can get uncomfortable. Very quickly.
One week, you could be reading news reports about how the stock market is awesome, and the next, you’ll be reading headlines like “Billions Wiped Out On Black Monday”.
It can get pretty scary to see your portfolio fall by 20, 40, 50%. This week, my net worth probably fell by thousands of dollars. (I don’t know for sure, I only glance at my portfolio once every 3 months).
But guess what? It doesn’t matter.
Why? Because the “discomfort” of being down is a short-term one – a temporary annoyance.
When you’re investing for the long term, you’re not worried about the day-to-day movements of the stock market. Because you know that no matter how bad the picture looks, no matter how many commando mosquitoes bite you in the short term, it won’t really matter for the long term.
You WANT This To Happen While You’re Young
There are a couple of guys in my unit who’re super “lao jiaos” (old birds). For example, I know a guy who’s 39 years old. And he’s still charging up a hill with the rest of us. #respect.
The thing about reservist is, you want to clear it while you’re young. You want to fight missions while your body can still survive on 4 hours of sleep. You want to take your IPPT while being able to tackle your 2.4km run without feeling like dying.
It’s the same when it comes to investing.
If you’re a young investor, you WANT the market to drop. You WANT the world economy to be in a panic. You want the trials to come when you have decades of investing ahead of you.
Why? So you can scoop up stocks now at basement bargain prices! It’s like going to Orchard Road and realising that everything is on sale at 20% off.
When you’re young, it’s good that the market stays in the doldrums for a couple of months or years. That way, with the same amount of savings, you can pick up even more stocks and ETFs, which will pay off handsomely in the long run.
The Ones Who Go Through It Become Stronger
I was in a pretty tough unit while serving my full-time National Service. After BMT, there were several people in my platoon who downgraded so they wouldn’t have to continue their training.
I’m not gonna lie that there were several times when I wished I did the same, especially when the training got really tough. But nothing beats the feeling of completing something seemingly impossible, and then looking back with pride on it. On my ORD date, I remember walking out of those camp gates with the confidence that I could take on the world.
Think back to a time when you punched through a particularly difficult period in your life.
People around you quit. Others laughed at you for foolishly continuing.
But you didn’t give up. You continued pressing on.
And that’s all that matters.
Because the ones who pass through that baptism of fire are the ones who become stronger.
There’s a reason why index investing has given its investors such great returns consistently. Lots of people are inherently suspicious about it: you mean I can get 7-8% returns without picking stocks and without timing the market? If it’s so easy, why doesn’t everyone do it?
Everyone doesn’t do it because it’s not that easy!
- It’s not easy to continue holding on when the market has fallen by 10% in a week.
- It’s not easy to consistently invest every month, even when you don’t feel like it.
- And it’s not easy holding on for the long term, especially when you’re sitting on a paper loss of thousands of dollars
But the people who persevere are the ones who’ll reap the rewards.
It’s easy to feel intimidated when you watch the news or read scary headlines about the stock market.
It’s easy to get discouraged when you see your net worth plunge by thousands of dollars.
But nobody said that good investing was easy.
It’s times like these that separates the few successful investors from the majority of losers.
Which group are you in?
Image credit: Xin Li 88