I’ve just got back from 2 weeks on holiday in Spain. One of the fun parts of holidays is tuning out from financial markets and thinking about other stuff before returning and seeing what has changed in the portfolio over the period.
We stayed in a holiday apartment which did not have Wifi and one of the upsides is that it made “screen watching” (i.e. watching share prices) impossible. I ditched my iphone about 9 months ago because I spent too much time on the Bloomberg app which had a live feed to share prices. My iphone also encouraged me to waste time reading financial news.
The quality of much financial media output is awful. There are too many pundits pretending that they have a crystal ball that allows them to see the future. They haven’t and they can’t. The media fights for your attention using fear and other evolutionary mind tricks. Headlines like “Is your pension safe?, “Houses prices set to crash” and “Cat food diet recommended for coming Apocalypse” are designed to panic us into a helpless state where we continue to consume their media product.
So I’ve had a period where I tuned out of the market news completely. On my return I updated my share prices and net worth spreadsheet. I found that our portfolio had gone up in value by an amount equivalent to roughly 20x the cost of our 2 week foreign holiday.
This was somewhat shocking to me but it does however reflect a couple of fundamental truths about investing and financial independence:
1) Your money works hard (so you don’t have to)
You do not want to be a shark. Sharks never sleep. Sharks are constantly working, searching for food. If they stop swimming, they die. They can not store food nor can they invest in Vanguard equity index funds and live off the dividends.
Instead you want to be a squirrel. A squirrel has a handsome stash of nuts buried in a cosy nest somewhere that allows him/her to hibernate during the winter. If you don’t feel like going to work for 6 months, you should not have to do so.
Money can work harder than people. Money does not take cigarette breaks nor watch Youtube clips of cats playing piano. Money does not attend diversity awareness training. It does not gossip at the watercooler nor bitch about its boss (You) or your other assets.
Money invested properly works hard for you, even while you are sleeping or on holiday. You can see what this looks like visually – see “How they did it: 12% per year“. When you start saving and investing your rate of progress may seem slow at first. After a few years though, it starts to accelerate. After 7 or 8 years it starts to take off as the J curve starts to slope upwards. When you have been going 18 years at 12% per year, it becomes fucking incredible to behold.
2) Investment returns come like ketchup
In the stock market you get your returns like you get ketchup out of a glass bottle. Progress is not smooth and linear. A long time is spent looking at the inverted bottle, waiting for something to happen. Verbal encouragement and cursing may be heard. I have even resorted to violence, smacking the bottom of the bottle*. Patience has not always been the strongest suit of The Escape Artist but its something I’ve learnt over the years.
Eventually, once an unknown tipping point is reached, the ketchup arrives on your plate in a non-linear fashion. You are then surrounded by Abundance. Like life, it can be a messy process but there is logic and a certain beauty to it.
I know that summer in the portfolio won’t last forever. Like they say on Game of Thrones, Winter is Coming. Before too long, we will experience another bear market and fortitude will be needed when seeing falls in the value of the portfolio. At those times, tuning out media noise will be even more important and we will need to focus on the dividends rolling in. Hopefully we’ll have the nerve and spare cash to pick up some bargains along the way.
* The Escape Artist does not condone domestic violence