Time flies when you are having fun.
It also flies as you get older.
Why is this?
One year at age 10 is 10% of your life lived, and as you near 100 it is 1% of your life lived. Exhibit A points out: “The year itself never gets shorter. It just keeps shrinking next to the life behind it.” Here’s their chart:
Time also flies if you take a wait and see approach to investing. You may be the type that “waits for the dip” or “waits for a correction” or “for the bubble to pop”. The problem with that approach is, you can be waiting a very long time. For example, it has been over 90 days already since we’ve had a 5% stock market decline in the S&P 500.
There can be stretches of hundreds of days without a dip. For some looking for the time to get in means you never have much time in at all.
The time you spend trading can also be a problem. Excessive trading can lead to smaller investment returns. One report published in an academic journal in the year 2000 pointed out the following:
Of 66,465 households with accounts at a large discount broker during 1991 to 1996, those that trade most earn an annual return of 11.4 percent, while the market returns 17.9 percent…Overconfidence can explain high trading levels and the resulting poor performance of individual investors. Our central message is that trading is hazardous to your wealth.1
To be fair, things have changed significantly since then—fees have compressed and some households are more educated on investing. But the point remains the biggest problem to increasing in wealth is human behavior—not bad external events themselves.
We don’t like to hear this because it’s always easier to blame a President or a party or a geopolitical conflict or the fear of coming collapse than to blame yourself. Sometimes the greatest hazard to your wealth is not outside of you, but inside of you.
Ouch.
For many, those that have spent the most time in the market are those that have had the greatest return.
Take some time to consider the time you have left investing, and, most importantly how you will live and the legacy you will leave with the time you have left.
--
Sources:
1. Brad M. Barber and Terrance Odean, “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors”. Accessed online.