I know how it feels to wake up f***ed up
Pockets broke as hell, another rock to sell
People look at you like you're the user
Selling drugs to all the losers mad Buddha abuser
But they don't know about the stress-filled day
Baby on the way mad bills to pay
That's why you drink Tanqueray
So you can reminisce and wish
You wasn't living so devilish s-s***
- The Notorious B.I.G., via Still Strugglin’
I am sure we can all relate to the above passage by the late poet, Notorious B.I.G. It is certainly understandable to be stressed by money and other financial concerns. This has been especially true lately. As the chart below shows, the VIX, which measures volatility and is sometimes referred to as the “fear index,” has been above its 50 day and 200 day simple moving average for almost all of 2016.
The last six months have been a different story compared to the first half of 2015. As Inspectah Deck adds, “A man with a dream with plans to make C.R.E.A.M, Still strugglin, Survival got me buggin'”
Michael Batnick over at The Irrelevant Investor had an insightful post last week where he explains a hard truth about investing:
If you’re feeling a little frustrated, I have some bad news for you, this is how stocks work. The stock market doesn’t owe you anything. It doesn’t care that you’re about to retire. It doesn’t care that you’re funding your child’s education. It doesn’t care about your wants and needs or your hopes and dreams.
I absolutely believe that stocks are the best game in town. I don’t think there is a better way for the average investor to grow their wealth. However, this is called investing and the price of admission is gut wrenching drawdowns and sometimes years and years with nothing to show for it. If you can accept that this is the way things work, you can be an enormously successful investor.
Behavior trumps everything when it comes to investing. The VIX chart above probably doesn’t even matter, as it is such a short time frame. However, to paraphrase Josh Brown, long term results are the only ones that matter, but long term is not where investor’s live their lives. They live them in the day-to-day short term. This is why it is crucial to have a plan, to bridge the disconnect between life and long-term investing results. As Biggie eludes to, the alternative is not pleasant.