Can You Stay in the Game?

I was shooting the breeze with one of our financial advisors at the bank I work at on one particularly slow day. I don’t handle stocks, ETFs and mutual fund investing directly, most of that stuff is routed through our FA network. Regardless, he knows I have an interest in the markets and investing, so we’ll talk about different strategies and companies occasionally. Most of the time he talks about annuities and fixed income funds he opens for our older customers. Because let’s be honest, if you go to the bank for investment advice, you are probably OLD and want to be 100% safe with your money. “Are those insurance companies safe?” “What happens if you go out of business?” “What happens if Joe Biden sells all our gold to China?” You know, those kinds of folks with those kinds of questions.

On this particular day, he decided to let me in on his own personal investment beliefs and strategies. We were talking about different annuity companies, index funds, etc. He’s been in the business for 30 years, so he’s been through a couple of market downturns and one major recession. Like Jack Bogle and Dave Ramsey, he likes index funds, however, he also invests in individual stocks when such an opportunity presents itself. He prioritizes companies with a long track record of success. He wants companies that make money and have turned a profit for a long period of time. Makes total sense. You wouldn’t expect much else from a licensed and experienced financial advisor.

When he realized he had me on the hook, he hit me with a line I think about at least once a week.

With a wry smile on his face, he said, “I made the best and worst decision in my entire career at the exact same moment.”

Let’s go back to the financial crisis of 2008. The long and short of it is a lot of folks were allowed to buy houses they couldn’t afford. When the bubble popped and those folks couldn’t make their payments, the banks were left holding trillions of dollars of worthless investments in subprime mortgages. The Great Recession that followed cost many their jobs, their savings, and their homes.

There’s technical minutiae, sure, but for the purpose of this writing, the biggest part is there was a ton of uncertainty in the stock market at the time. If you lost your job, your house, or your life savings, it stands to reason you weren’t running to the stock market for help.

Our financial advisor was one of the few people with a secure job. The institution he worked for during the crisis had very little exposure to the aforementioned subprime mortgage loans, and his wife had a secure income as well. They were uneasy, sure, as everyone was, but they were also lucky enough to have cash to invest.

The best decision he ever made, by his own acknowledgement, was that somewhere between October 2008 and April 2009, he bought Apple stock for less than $4 a share.

Because he knows I have an understanding of the market, his smile got bigger.

The worst decision he’s ever made?

“I wasn’t bold enough to sell my house to buy more of it.”

He was joking of course. He had a wife and two young children at the time. The housing market was in ruins. There was no way he was going to sell his house to buy stocks in a tech company 2500 miles away. It would have been an insane decision. BUT, parsing through his words, I could tell there was a lesson he wanted to impart on me — and a lesson he tries to remember in his investing decisions going forward.

As of this writing, Apple is trading somewhere in the region of $170 a share. He didn’t get into specifics regarding the total amount of shares he purchased in 2008/2009, but let’s say he spent $5,000. As of today, those shares would be worth $265,476.89. A huge profit! Certainly nothing to complain about.

But he knows he could have put more cash in, and by being timid or lukewarm about his decision, he missed out on life-changing, generational wealth.

Just for the sake of the example, let’s say he did, in fact, sell his house to buy Apple shares. He somehow convinced his wife and children to move out of the family home and move in with grandma and grandpa for the time being. (A nightmare scenario for anyone reading this, I’m sure.) Let’s say he was able to sell his house in West Knoxville for $150,000 at the time and he dumped the entire proceeds into Apple stock. Those shares would be worth nearly EIGHT MILLION DOLLARS today. So much money he and his wife could quit their jobs, and his kids would likely never have to work either. Vacation houses all over the world. Enough money to bribe his preferred political candidates! Anything he could ever want.

Of course, this is a fantasy world. Real people in real situations cannot and do not operate like this. We want security and stability. Selling your house to buy shares in one company is a really bad decision and, more often than not, would leave you broke or in an insane asylum as you watched the fluctuation of the market every second of every day. Expecting yourself to be able to stomach a move like this is asinine.

The point I’m trying to make is, can you stay in the game? Can you keep your income and savings stable enough to be able to invest during market interruptions? It doesn’t have to be individual stocks like Apple (although that is where the largest returns are.) Can you keep contributing to the index funds in your 401k account even as the returns turn negative? Can you stash money away in your brokerage account even when everyone — your parents, your spouse, the man on TV, the Presidential candidate — is telling you the country is going to Hell and will never recover?

There’s a famous Warren Buffett line about being greedy when others are fearful. That’s great for Uncle Warren, a man sitting on boatloads of other people’s money. He has the superhuman intellect and ability to be able to pick the perfect time to buy the perfect company.

You are I are normal people with normal jobs and we simply want to be able to afford to retire on time, or to make sure we’re not a financial burden to our kids when we’re old and feeble. The best way to achieve these simple goals (and maybe get lucky on the future version of an Apple-like company) is to keep ourselves in the game. We have to invest when it is uncomfortable to do so. We have to ignore the financial pundits and the preppers hoarding silver coins in their basement. We have to work hard (and get a little lucky) to keep stable employment so we can provide for our families and keep a little money in our savings accounts for unexpected expenses. Being forced to liquidate your investments in an emergency is the worst case scenario — you have to start all over again at some future date, disrupting your retirement window.

The history is clear over 250 years — it is always a bad time to bet against America. The market always recovers. The American people always figure out their problems. Civil War, World War, it has always been true: Staying invested through market downturns is the only way to get an outsized return on your money. Stability matters more than any other factor.