In Search of a Magic Pill
“I’d like to invest a little bit into xyz or abc, Vince.”
“Why?”
These are the two most common answers:
- “Because my friend/family/colleague is doing it.”
- “Because I read, listened to, or watched something that says industry xyz or company abc is guaranteed to grow fast.”
These are some of the toughest conversations to have. When the market gets hammered, the message is always the same.
Don’t sell. Just keep buying. This will pass. And if it doesn’t, the end of the world only happens once.
I don’t enjoy market crashes, but at least those conversations are straightforward. They’re simple, but they’re not easy.
But the “just a little risk to see what might happen” conversations are tougher. That’s because they’re about hope, and they’re about not wanting to be the only one who didn’t get rich quick.
They’re driven entirely by the other fear. The fear of missing out.
There’s nothing wrong with wanting to grow your money. But there’s a difference between investing and hoping and praying that a story plays out the way you think it might.
And that’s what makes my job so tough.
What if your friend was right? What if that podcaster did nail it? What if that doomsayer, after being wrong for fifteen years, gets it perfect it this time?
Then I’m just the loser who told you to keep things boring. I’m just the loser who told you to stick with the plan while everyone else was getting rich on the next big thing. I’m just the loser who told you that envy and ingenuity drive the world.
And believe me: when I’m successful in getting you to stick to our investment plan, I also get worried. What if that one stock your friend told you about - the one you wanted to put a thousand, maybe five thousand into - into grows by 10,000% over the next five years? Well, you’ll fire me, undoubtedly. (Those em dashes are mine).
That’s the fear: not missing out on returns but looking and feeling stupid. And it applies to me and you.
But the odds of that happening with publicly traded stocks are so minuscule. I know what you’re thinking: “I could have invested in Amazon in 1997, Celsius in 2013, Tesla in 2010, Monster Beverage in 2000, or Nvidia in 2013.” And never sold? Not once? And endured the outrageous drops along the way? I don’t think so. And that’s only talking about the few stocks that were life changing. Most of them aren’t.
Thankfully, the data supports the boring course of action. And that course of action works well. You and I don’t know who the future winners are, so we own everything. And we try our best to never sell.
The boring method sometimes doesn’t feel good, and it doesn’t look smart, and it won’t impress anyone at a dinner party. But it works.
Chasing the next big thing feels exciting, right up until it doesn’t. For every person who “got in early,” there’s thousands of people who quietly lost their shirts. They just won’t talk about it.
There’s no magic pill. Get the boring part right, and you’ll be just fine.
