Barfing Your Way to Investment Success
(Warning: do not read while eating lunch or if allergic to philosophical musings.)
The joys of Road Warriordom are many: cramped middle seats; endless flight delays; small, impossible-to-open bags of over-salted peanuts. Some days - thanks to delays, cancellations and ever-present bureaucratic stupidity - are worse than others.
And yet on a recent trip to Charlottesville, Virginia, things appeared to be humming along just fine. It was a beautiful spring day and we were right on schedule. Ours was a prop plane, but even that didn't dampen my mood - a longer flight, yes, but also a more leisurely approach into La Guardia and a chance to savor my favorite skyline.
There was, however, one little hitch: Prop planes mean turbulence. That doesn't bother me (I have a cast-iron stomach), but it clearly was a problem for the woman and toddler seated across the aisle.
I hadn't seen this much projectile vomiting since one of my sons outgrew the stage. He shall remain nameless (you have a 50/50 shot at guessing correctly, however), but let's just say that for the first two years of life he was known around the house as "Sir Barfalot."
But I didn't really mind; one good thing about being a parent is that it teaches you compassion. When something horrific happens to other people's children on a plane - whether that's temporary satanic possession or saturation vomiting - you're just so grateful that it's not your child and your public mortification that even if stray bits of chunder land on you, it's not a big deal.
That said, the scale of the resulting cleanup - only slightly smaller than BP's Macondolypse Now - made me wonder if mother and son would ever fly again.
Which was a stupid thought, I soon realized. I mean, what are the alternatives? By foot, by bicycle, by car, by bus, by train? All of these are impractical, take more time and, while generally less turbulent, come with their own share of risk.
It's kind of like investing: If you want to reach your final destination of a decent-sized nest egg, at a retirement age shy of three digits, you're going to risk throwing up along the way.
The problem is that market turbulence (a.k.a. losing pots of money) can be so traumatic that some investors develop a fear of flying. Individual stocks blow up, the market swings between extremes of fear and greed, and even that old standby, diversification (or diworsification as a witty friend puts it), doesn't help when all asset classes implode concurrently.
Add to this the human, asymmetrical bias towards feeling more pain when things are bad (read: losses) than pleasure when things are good (read: profits), as well as our tendency to remember the unusual (plane crashes) rather than the common (car crashes), and it's no wonder some people go running for the exits.
But the truth is, all approaches to making money come with cookie-tossing potential:
- If you buy gold, you have a negative return each year because it costs money to store, whether you rent storage or have to pay for a safe-box worthy of the Ocean 's Eleven team.
- If you keep cash in your bank, you better be sure 1) your bank is solvent and your account balances are no more than the FDIC insured limits, and 2) the rate of interest income minus taxes and minus inflation is positive. And even if these are both true, at any time during your snail's pace journey from Charlottesville to New York, you could get blown back to the starting line thanks to taxes, interest rates or inflation changing.
- If you keep cash under your mattress, that's even more pathetic. Not only have you added the risk of being robbed by someone in blue jeans instead of a suit, you probably still had to pay taxes (I won't ask so you won't have to tell), you're getting NO interest, and you still get dinged by inflation (the real life kind, not the kind the government calculates).
- Bonds can lose you more money than you're likely to ever make (OK, I know it depends on your investment timeline, and if you're 104 years old I agree that investing in bonds is far safer than in Zimbabwe equities). Real estate is a roller coaster ride. Diamonds are only your best friend if you have faith in a rapidly fading cartel, not to mention the blood money involved.
Everywhere you look, there's barf-inducing turbulence.
So here's where I come out. I learned early on from my grandfather of the awesome power of leverage to wreak havoc on the downside. To this day, I remain a chicken about debt, but my cast-iron stomach keeps me happily in the investment game.
Maybe I'm just a risk-taking entrepreneur at heart, but somehow I'm able to keep in mind that waking up every day has its perils and in the long run we are all dead. Investing (and life) means dealing with - no, expecting - turbulence along the way and savoring the occasional and unexpected smooth flight when it does come around.
Just be sure your tray table is up and that barf bag is in the seat pocket in front of you.