Everyone knows the feeling…
You see or hear about incredible returns and you wish that you had gotten them.
You see or hear about horrific slides or crashes in various investments and you are thankful that you avoided them.
I grew up in a house where we talked about money. My Dad was a CPA, and a banker. My Mom was a loan officer so real estate and finances were common topics. So it’s not surprising that I was comfortable talking about money with people. When I was in college I was asked to speak to my grandparents about investing.
I was 19 and they were in their 70s. They lived off of a modest pension and social security. They’d managed to save some money while raising 7 kids but they kept it in CDs for decades and inflation had not been kind to them. The math of costs for health care and everything else outpacing the increases in social security and the returns on CDs meant that they would eventually run out of money….
We talked for hours about investing, stocks, bonds, compounding, etc…they were very smart and understood all the concepts. They also understood the certainty of running out of money. However, despite the intellectual understanding, the reality is that my Grandpa was born in 1918, he was 11 years old in 1929 and lived through the Great Depression through the late 30s while he was coming of age. That experience was soooo powerful that he refused to invest in the Stockmarket for his entire life, he wasn’t going to change in his 70s.
I had read about the Great Depression but had no real appreciation for it. It was not part of my lived reality so it’s easy for me to discount it as a historic anomaly. But for my Grandpa, it was like it had happened yesterday. He was able to recount the big empty houses in New Jersey that had been abandoned by the people that had lost all of their money in the market, not one or two, but blocks of them…
I’ve The Psychology of Money by Morgan Housel, multiple times and gifted it to people. You should read it. He shares the idea that what someone experiences in their life is a small fraction of the lived experience in the world but an incredibly large and meaningful part of their experience. This is why people do things that might not make sense to you, but make perfect sense to them. Only now, decades later, do I realize that this is exactly what I was experiencing during the discussion with my Grandparents.
The Great Depression was such a powerful experience in their lives and instilled such a high degree of fear about the stock market, that nothing was worth exposing them to the risk associated with that monster. Now I had never lived through the Great Depression and it was easy for me to dismiss the monster casually as if it was something under a bed or hiding in a closet. I had never confronted it so it was basically make believe to me.
We spoke for hours, they shared many stories with me about that time, stories that I had not heard before and my Grandparents are just like yours,.. they told the same stories over and over again. But these stories did not get shared because they were the scary stories about loss and the dangers associated with the depression. We cried together and they pleaded with me not to make them invest in the market, I could not do it. So we ended it with them continuing to invest in their CD’s and we sold their house and the family made it work.
That time around their kitchen table was a powerful experience for me as they reflected back on over 50 years of marriage, 75+ years of life and the trials and tribulations that they survived. Staying in CD’s was the right answer for them. The market is not for everyone, but if you’re willing to take the risk, it is very powerful. The power can lift you or take you down, so beware.
You are much better off being cautious and able to hold than being bold and bailing during a downturn. The goal is to build wealth, not win a game. A phrase I like that is applicable here.
There are old pilots and there are bold pilots, but there are very few old, bold pilots….
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