We’re in a bit of a depressed stock market right now. What are you doing? Panicking, grabbing all assets, and jumping ship like you’re a passenger on the titanic and your entire world is going down? Or are you leisurely glancing at the stock market, shrugging, putting some groovy music on the stereo, and thinking thoughts that are much more valuable to you than the stock market?
If you’re not prepared for a market drop, anxiety can creep in. The market can feel like a family of evil black vultures ready to rip apart the dying carcass of your struggling financial portfolio. But there is a way overcome these feelings: It’s called chilling out on the small things, and focusing on bigger more important things.
I tweeted my thoughts on a dropping market on Friday. The tweet got 280 likes. This higher-than-normal level of interaction tells me that this bit of advice was helpful to a lot of people. It made me want to expound on my thoughts and tell the origin story of how my long-term chill mindset developed. This is what I wrote:
Invested $2,000 into the market yesterday. There’s a good chance I’ll regret that decision in 3-6 months if the market keeps tanking. But nearly 99% chance I’ll be grateful I did it in 5-15 years. My story on how I avoid short-term anxiety and embrace long-term chill.
— Wealth Well Done (@WealthWellDone) December 28, 2018
Here Is The Origin Story of My Long-Term Chill Mindset:
I was about ten years old the first time my parents told me about the stock market. I don’t remember them telling me how to invest, or what to invest in, or how to make money from it. I just remembered them saying these simple words. They made the sound in my brain of an arrow hitting a target:
“The stock market is a place where the money you save can make more money. The market goes DOWN some of the time, but UP most of the time.”
For whatever reason, I mentally stored that last sentence in my brain as an eternal truth. It was a truth are real to me as concrete, and predictable as the sun rising in the morning. “The market will go down some of the time, but up most of the time.”
At 10 years old, I made a mental agreement with myself that this is how life will work most of the time: No matter what you do, all success is a constant process of taking two steps forward, and one step back.
To put this revelation into financial terms, I just accept the fact that the stock market will go up and down. Change is normal. It’s just like how the weather changes. On average, in a summer week, you’ll get 5 days of sunshine and 2 days of rain, cold, and clouds. So enjoy that sunshine while it lasts, but be aware that a cloudy day will always be on the horizon. The same is true with the market: 3 days, or 3 months, or 3 years can be great, but you’ll always have that one day, or one month, or one year which is a bummer. Change is the natural landscape of investing. And just like the weather, this landscape is mostly good, but there’s always going to be some hard times mixed in. This is just the natural experience of investing in the stock market and life.
Since then, I’ve tried to make a mission out of my life to enjoy and take advantage of the 2/3 of good times, and chill through the other 1/3 of bad times. Because even though a stretch of life may suck, there will always be better times on the way. This long-term chill mindset was super helpful when I started investing, because I learned not to be surprised or anxious when a downturn happens. Instead, it’s just a small part of a bigger and better weather pattern that’s always coming along.
Second Chill Mindset Moment:
This memory came from 2008 or 2009. The world financial markets were absolutely tanking in the great recession. Markets were down 40+% at the time. Shopping malls felt empty. Companies were letting people go. Fear and panic spewed out of people and it was contagious as you breathed the air. Stories of people cashing out their retirement accounts became normal because people were afraid of losing everything.
In 2008, I didn’t own any serious investments, so the stock market drop didn’t really affect me. But I knew people who did. I remember having a conversation with a retired mentor who had around a million+ dollars invested in the market as the great recession was happening.
I remember asking them:
“It looks like the stock market is falling apart. Are you going to cash out of your investments?”
I remember them shrugging, looking super chill, and replying: “I’ve been through recessions before in the 1980’s and early 2000’s. I never sold when the rest of the world was panicking, and that’s probably one of the biggest reasons why I have the money I do today. I’ll ride this storm out, just like I rode the other storms out. It worked for me in the past, and I’m betting it will work for me again in the future.”
I remember how super-chill this person looked even though they were trapped in a moment where hundreds of thousands of dollars, or millions, were just disappearing in their investment accounts. They didn’t panic. They just shrugged, and said, “That money will come back eventually. People don’t get burned when they lose a lot of digital money. They get burned when they sell at the bottom and miss the exciting ride back to the top.”
I remember thinking to myself: That’s what a professional investor looks like. When I get my chance to invest, that’s the mentality and disposition I am going to have even when the world around me is getting anxious and vomiting fear and panic all over humans who don’t know how to defend themselves. Short-term anxiety can steal like a thief. Long-term chill is the antidote that can beat that thief.
Third Chill Mindset Story:
JL Collins, is one of my favorite money bloggers. His stock series changed my investing life for the better. His book, The Simple Path to Wealth, is extremely well liked. He wrote this super cool paragraph on one of his recent blog posts:
“This volatile and correcting market is also a great chance for a “gut check.” Does it make you:
- Yawn, roll over and go back to sleep?
- Rub your hands in gleeful greedy anticipation of buying more shares more cheaply?
- Chew your nails down to the quick?
- Check your fund price daily?
- Watch hours of investment gurus?*
- Toss and turn, waking up in a cold sweat?
If the first two are you, you’re good to go. If the last four are more what you are feeling, that is important to know. This is a great test to see how you really feel about stock market declines. It is all too easy to say they won’t bother you when the market is going up. Far tougher when it is falling. And it can, and at some point will, get much uglier than this. If you panic and sell when it happens, my advice here on the blog and in my book will leave you bleeding by the side of the road.”
I love those lines: “If you yawn, roll over, or go back to sleep, and gleefully buy more shares cheaply, you’re good to go.” I love it because it sums up the perfect long-term chill investor mentality to have when the market isn’t acting like roses, sunshine, and cool wine on a hot day.
Fourth Chill Mindset story:
This revelation probably happened in my 20’s, when my life was a total mess due to selfishness, drug abuse, and an entitled attitude. I had spent most of my young life thinking that everything would just naturally work out well for me, simply because I had a family who helped me through everything. I somehow embraced the ideology that to become successful, I’d just have to look successful.
But that was one of the dumbest ideas I ever thought up.
What happened was that I was so focused on creating a successful outward appearance, that I became lazy and selfish on the inside. As I tried to schmooze my way through life, I ended up attracting a bunch of hell into my life.So in my mid 20’s I threw everything away I thought I knew, and I started all over. One of the first new thoughts I embraced was:
“The success you’ll experience in life, will only be as good as the person you are on the inside.”
This idea was liberating and revolutionary to me. I realized I no longer had to stress about striving for success. I now had to simply work on becoming a better person on the inside, and then the success I wanted would naturally begin materializing on the outside.
As I became less self-centered and flaky, better things started happening to me. More people wanted to work with me and help me. I was able to spot better opportunities coming over the horizon. I was able to save more money than I’d ever saved, because I wasn’t wasting it on all the stupid junk that was keeping me oppressed. Once I quit choosing short-term highs I was addicted to, I gained the strength to accomplish some of the longer term goals that always eluded my spotty character in the past.
I no longer allowed myself to crave achieving the short-term results of “looking successful.” Instead, I devoted myself to the mindset that life is a long journey. The goal of life is to become the best person you can be. Your success will be determined by the quality of your inner character. After realizing all this, I decided to chill in the short-term, and do everything I can to build the vision of who I want to be in the long-term.
Therefore, I never worry about the daily stock price. Instead, I focus all of my energy on how I can be a better human being in the long-term. By the time you get better, the day’s stock price will also usually be better.
Fifth Chill Mindset Moment:
Another unique trait that has helped me build a long-term chill mindset is that I am rarely thinking about the current moment. (And I honestly don’t know if this is a blessing or a curse.) But it has helped me become a better investor. This is why:
I am always day-dreaming 5, 10, or 15 years in to the future. It’s a curse because I don’t always feel like I get to experience all the little special moments in each day. But it’s a blessing, because always thinking about the future, which helps me make the best decisions to create the future I want to live eventually.
My wife gets annoyed by my mental absence sometimes, because I’m easily distracted in various plans and thoughts about the future. But always imagining my long term vision for 5-15 years, which is one of the greatest traits that has helped me become a successful investor and embrace the chill mindset even in volatile market days.
Who cares if it’s a bad day in the market? I’m not living for today anyway. I’m living to always accomplish that big dream I have in 5-15-30 years. Even if I have one bad day, or one six month bad stretch in the stock market, it doesn’t matter to me because I’m not after short-term gains anyways.
I’m more interested in the big gains, and achieving the big dreams, I see out in my future of 5, 15, or 25 years.
So in this regard, I’m not really saying, “be like me,” because I am not perfect. But I am saying it doesn’t hurt to take an occasional peek into the long-term future, and remember that becoming the person you want to become in the big picture is the most important thing in life. Each day, and each market upswing or downswing, is just an individual step ladder to help you get to the person you want to be. So don’t get caught up on the steps. Focus on the ladder that is going to take you to your destination.
In the end, one of the biggest secret weapons to help you become a successful investor is this: Ignore short-term anxiety and embrace the long-term chill mindset.
Please share your thoughts in the comment section below so that you can inspire someone reading this after you! (Anonymous comments are fine.)
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