As humans, we are wired to prefer immediate results.
We fulfill our needs and desires at the click of a button, we are used to convenience, fast shipping and instant gratification.
Even long-term projects, like learning a new language, let us feel positive progress quickly. We can say new words and sentences in a matter of hours.
At work, we count on receiving immediate feedback.
We expect results to be positive. If not, we fix things and avoid negative results at all costs.
Think of a popular phrase “Don’t bring me bad news, only solutions” or the fact that most social media has only the “Like” button.
If our practice no longer provides wins, we look for a new method.
In investing, there is no such thing as immediate results when the short-term outcome is negative.
This makes investing an uncomfortable activity.
After years of fixing problems and getting positive results, we are not ok seeing our savings drop by 20% in one month.
Many invest based on a plan to achieve personal goals. When portfolios drop, not only do investors feel the pain of the loss, but also move further away from the plan.
We naturally want to fix things, to immediately improve the situation.
Unfortunately, such fixes become the problem, not the solution.
Learn to see expected occasional losses as wins.
Presuming you selected an investment approach that you believe has a high probability of ‘working’ over the long-run, then the expected negative periods can be seen as wins.
We can’t control the markets, but we can control our actions.
We can see dropping prices as normal, expected and in fact a positive for future returns.Every negative day that you did not give up and abandon your strategy, is a day you won.
Before I adopted an investment approach that I knew I could trust, I could not see losses as wins. Dropping markets would make me want to sell and wait things out. Now, I see the negative periods as the necessary steps towards winning. In fact, I am strangely glad to live through the negatives earlier on, so that I can strengthen my ability to weather the storm and stay the course.
To achieve this, I had to answer some hard questions like:
what maximum loss or lowest long-run return was I ok with? (more here)
what is the difference between volatility and risk? (more here and here)
what would happen if my strategy failed? (more here and here)
what does long-run history teach us about the markets? (more here)
what is my style in making the most important investment decision? (more here and here)
We are wired to prefer immediate results, so staying the course can be painful. Acknowledge the pain of uncertainty, take a breath, come back to your strategy, remind yourself of the reasons you chose it and try to enjoy the ride!
Seeing losses as wins transforms investing from a nerve wrecking roller-coaster of anxiety and regret into a confident sailing through the expected ups and downs.