Staying the Course

Stay the course - it sounds so simple.  Keep moving forward and trust in the process.  Focus ahead, watch your step, and whatever you do - don't stop and don't turn around now.  

The reality is, this is difficult.   When faced with uncertainty and situations that make us a bit uncomfortable, we want to take action. We want to "fix it," address the uncertainty, and move forward. 

A recent article I read on CNBC's website did an excellent job of describing the challenges of staying the course when it comes to investing & down markets.  As described by a director of personal finances (Tim Maurer), there are four-steps to evaluate as you consider whether to stay invested during a market decline which are all a trade-off of pleasure and pain:

  1. The pain of staying invested is that I could lose even more.
  2. The pleasure of moving to cash is that my worry is eliminated and I'm guaranteed not to lose any more.
  3. The pain involved in moving to cash is that I'll miss the upside, thereby eliminating my opportunity to recoup recent losses in the next market up move.
  4. The pleasure in staying invested is that I'm giving myself a better chance to achieve my financial goals in the long term — the reason I invested in the market in the first place.

The simplicity and clarity of this process really struck a chord with me.  The bottom line is that for most of us, the pleasure of remaining in the market and achieving our goals in the long-term should be our focal point.  Any short-term pleasure of removing all risk will only be replaced with pain of not meeting our goals or missing the rebound. (If you don't think missing a few days of rebound matter, think again.  See this chart from Blackrock. )

Bottom line - we know it's difficult.  But if it was easy, there would be no reward.  There would be no long-term growth of capital.  Everyone would do it.  You are among the brave few who are on a course towards your goals.  Stay patient and stay on the path.   Your future self will thank you.