Previously published in The Bulletin, Bend, Oregon on January 9, 2023
I was reminded the other day of a quote by legendary Entrepreneur and Philosopher Jim Rohn: “We must all suffer from one of two pains: the pain of discipline or the pain of regret. The difference is discipline weighs ounces while regret weighs tons.” When I read those words, I hear them in Jim’s iconic voice. This wisdom pervades all areas of life including relationships when scheduling time, initiating conversation, and listening lead to deeper connection. It includes career, when continuous learning and work ethic lead to advancement; and it includes health, when regular exercise and a healthy diet lead to wellness. Yes, it also includes investing, when patience and sticking to an appropriate plan in good times and bad is rewarded over longer periods of time.
With all the stories and sorry sentiment swirling around us lately, it is to be expected that fear would be prevalent in the minds of most investors. Currently, it feels as though the only thing certain is uncertainty itself. From poor investment returns and political anxiety, to inflation and interest rate hikes, there is plenty of ammunition for anxiety. The arguments are compelling for selling out of one’s investments and holding on to cash, even with inflation’s sting of a guaranteed loss of purchasing power. I concede that it is uncomfortable to endure losses, especially of great magnitude or long duration. Still, being patient and disciplined during these time periods provides for growth in character, in addition to a meaningfully higher rate of return, in comparison to attempting to time the market.
In my experience, most people understand, at least at an intellectual level, that moving to cash in a market environment like the one we are living in now is a poor investment decision. However, many investors allow their emotions of fear and greed to supersede their intellect, leading to sub-optimal, if not harmful, behavior. Our psyche is designed to stop and avoid pain for our own livelihood. A loss in one’s portfolio psychologically produces such pain. This natural response has protected mankind from harm for millennia. When we feel something hot, we stop touching it to avoid being burned. As crazy as it may sound, this is the same innate response that causes us to want to sell losing positions in our investment portfolio. With the extensive turmoil we have been facing lately, it is understandable to want to stop the bleeding. It will always be uncomfortable and go against our human nature to endure through loss. However, it is paramount to remember that selling does not prevent but rather delays and amplifies pain – the agonizing pain of regret. Remaining invested while your portfolio is down 20% is the pain of discipline that investors must suffer through to realize the desired result of long-term portfolio growth.
While discipline can feel painful, it is also well rewarded. Consider the other areas of life where you apply discipline and the results you have reaped in your life because of it. Stay steadfast in discipline. It may be more short-lived than you imagine. Your future self will thank you.