Millenials ain't seen nothing yet

More and more people blog on how they became financially independent or are doing great on the journey to get there. At this stage it starts to feel like only idiots still have to work for their money.

The raging bull

There has been a bull market for about a decade now. Blogging is popular with millenials and I much appreciate the fancy lay-outs and formats of their blogs as compared to the rather basic level this old fart is typing in. The longer the current bull market will continue to march on, the more people will be around that have never experienced a significant market drop. And also the more people that were hesitant at first, take the plunge and dip their toes into the stock market. 

Imagine you are 32 now, started working a decade ago and you were smart enough to start investing from the beginning. Or a bit later because you thought stocks were scary at first but it turned out everyone was making money except you. Here’s what your investment world looks like:

I am so smart; my investment tripled over a decade!

The old farts

So the last decade is exactly like all the older legends of the FI community have been telling you it will be, the market always goes up. This is in fact also true if you look at the 30 year time frame:

Fantastic, it went up 10-fold in the last 30 years!

Well, yes it did go up a lot. But look closer, there is two nasty drops of around 50% there. These represent the internet bubble bursting and the financial crisis. Sure, with hindsight everything worked out fine for your investments but trust me that is not what it feels like when the floodgates open.

The aging bull

I see a lot of people reporting monthly performances of their “young” portfolios reporting things like “we had a difficult first week of the month but it recovered nicely afterwards”. This 1-2% drop you experienced should really not be confused with the flood gates opening. We are talking -25% before you could blink an eye. And it is a given fact this will happen again at some point. It regularly does. We just don’t know when so we can't time it. And bear markets always move much faster than bull markets. We only know the turning point comes one day closer every day. 

Off course we are all confident we will just buy more stocks when this golden opportunity of low prices arrives. However, the people around me that are into Bitcoin all told me the same at the beginning of this year. “We'll see $50,000 later this year. If it first drops below $10,000 all systems will crash because of the great opportunity to buy more, everyone will flood in!”

Then the shit hit the fan. Only thing that happened was that people stopped reporting their daily double-digit gains at the coffee break and now tell me block chain is a long term investment. Market volumes have dropped dramatically. People bought high and do nothing now that prices are low.

Prepare yourself for the trouble ahead

Please don’t let the same happen to you wise, young, low-cost index fund investors. Stick to the plan. Buy low, sell high. Or even better, never sell. Have a few interviews with Jim Collins lined up in your playlist. Write a letter to yourself with the long-term plan. 

Once the shit hits the fan, listen to the soothing voice of Jim. Read what the plan was in the letter from your rational self to your panicky unstable current self. Do your breathing exercises. Calm your “I told you stocks are risky” spouse down. Buy more stocks every month. Celebrate the low prices as if there is a sale at your favorite clothing store.

The really long-term ride is not easy. You young investors just got a lucky start with your first decade. The road will be rocky but extremely rewarding if you do what you know you should do in the storm ahead. Don’t drop off the wagon, stick to the plan and prosper! I'll try to do the same on a -1.5% day like today. Because quite frankly, you'll never be experienced enough to get the mindfuck completely out of your game plan.