The Hardest Part of Investing

Reading time: 2 min

Do you know what the hardest part of investing is?

It’s not needing a high IQ or a fancy degree. And it’s not researching different companies, cryptos, or NFTs.

It’s doing nothing.

When the market is booming, it’s hard to resist chasing the latest hype when it feels like everyone is hitting lottery tickets.

And when the market is tanking?

It’s painful to sit there and not panic sell as you’re watching the market dip and dip. Especially during times like these when companies are blowing up and you’re doom-scrolling through hundreds of posts shouting “the world is ending!”.

Success in the investing game is 1% buying, 99% waiting. What matters most is keeping your cool through all the ups and downs and giving compound interest time to work.

I love this example from Morgan Housel’s The Psychology of Money.

Let’s say you and two other people have a competition to see who’s the best investor.

We’ll call the other two: Jim and Tom.

From 1900 to 2019, you’re each given $1 every month to save or invest in the U.S. stock market.

You invest your $1 every month—no matter what. Rain or shine, market up or down.

Jim gets easily spooked. He invests $1 every month. But when there’s a recession, he sells everything and saves his money in the bank instead. He invests everything back into the market when the recession ends.

Tom isn’t as quick as Jim. He sells six months after a recession begins, and invests back into the market six months after a recession ends.

Can you guess who will have the most money in the end?

• You would have $435,551

• Jim would have $257,386

• Tom would have $234,476

Ain’t even a competition. You win by a landslide, GG.

There were 1,428 months between 1900 to 2019. About 300 of those months were during a recession. By staying chill during 20% of that period, you end up with 70% more money than Jim or Tom—and shit went down during that time.

• World War 1

• Spanish Flu

• Great Depression

• World War 2

• Vietnam War

• 9/11

• Afghanistan War

Despite all that, you’d come out on top by continuing to invest and staying the course.

We’re our own enemies when investing. Our emotions can get the best of us, and emotions and money don’t mix.

How you can avoid emotional investing is to stick to an investing plan and dollar cost average (DCA). This is just a fancy word for investing a set amount consistently.

It could be $1000 a month or $100 a week. Whatever amount you’ll stick with. Having a set plan helps keep you in check.

Once you have a schedule, you can then automate your investments and completely remove yourself from the equation. Set it up once and your money will automatically be deposited and invested for you.

While everyone is losing their shit, just DCA and chill.

Talk next week,

Fifty Sat

P.S.

We crossed 500 subscribers! I appreciate you reading this and thank you for rockin’ with me. We’re just getting started 🫡

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