Imagine some of the things that scare you. I’m guessing you’re envisioning scenarios that you’d prefer to avoid. Now, think about embracing all that, which is a potentially unpleasant idea, but that’s exactly what financial planners are asking you to do when you receive a stock recommendation. Equities involve risk, which can be unsettling, but I believe it’s the way individuals handle fear which separates successful from unsuccessful investors.
There’s a Buddhist concept that I’m at the fringe of learning, but it may apply here. The notion is simply this – let go. My limited knowledge about the religion is novice at best, but I believe the idea is to forget trying to control the things you cannot control. The stock market falls into that category and therein lies the fear. It does what it does, despite how you or anyone else feels about it.
So, exactly what do equities do? They go up and they go down, usually up more than down, but no one can say if that trend will always be so.
There’s a document called the Matrix Book from a company called Dimensional Fund Advisors that provides a highly comprehensive compilation of stock performance. An updated version comes out every year and it says the Standard & Poor’s index return from 1926 to present on average is about ten-percent. (It measures a multitude of other indices, but I thought I’d use one that’s fairly common.) A another point – it’s silent about what stocks are going to do tomorrow, the next day or in the years ahead and that’s the scary part. No one knows precisely how stocks are going to perform. Plenty of people say they know, but they don’t. What we can confidently say is that the stock market has returned ten-percent to investors over time, but there’s risk and it's precisely because of that risk investors have the chance to make money. The risk provides the opportunity for reward.
I had what I consider a profoundly interesting discussion recently with a new client about investments, fear and patience. We were talking about the habit of checking portfolio performance each day and she made this salient point; would you check your home’s value every day or even on a weekly basis? Probably not, so why check your stock portfolio so frequently?
Webster’s dictionary says Buddhism teaches that “suffering is inherent in life and that one can be liberated from it by cultivating wisdom, virtue, and concentration.” Could it be that wisdom, virtue and concentration also involve the ability to let go? Perhaps there is suffering in uncertainty, but stocks tend to reward patient people. Ask yourself this question, am I ready to let go of my fears about stock market uncertainty? Only you can answer that and I invite you to let your conscience be your guide.