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A few month ago, while aboard a Delta flight returning from our vacation in Jamaica, Mr. r&R stumbled across a short episode under the Business/Innovation category of Delta in-flight entertainment where industry leaders were being interviewed. You know, the typical corporate advertisement camouflaged as a thought-piece.
We have no idea what the hell the guy was talking about, what product or service he was promoting and don’t even remember what he looked like, but we do remember almost jumping out of our seats when he uttered the term “aggressive patience”. We’re suckers for bending and twisting language so naturally, we were intrigued by his word choice and how powerful a concept it was. According to Google, patience is defined as follows-
The combination of the two made our minds immediately transition to the civil rights movement and the use of non-violence as a tactic for change. Obviously wealth building and investing are less brutal endeavors than fighting for basic equality but the tactics used to drive long-lasting change are conceptually similar. Squishing the two words together,
we define aggressive patience as the capacity to forcefully exercise restraint and vigorously tolerate delay while enduring tremendous attacks of volatility.
More important than our definition, we believe THIS is precisely what it takes to pull off the plan we have to retire early. Now this does not mean we abstain from all spending on pleasure but it does mean that we make deliberate decisions every day to ignore the plethora of temptations that present themselves in exchange for getting us that much closer to ultimate freedom. It also means that along the way, there will be some scary and uncomfortable moments.
When you’re invested in the stock market there will undoubtedly be times where your portfolio takes massive hits. For example, a few months ago in response to “God knows what” the market took a nose dive and the media fear machine was all too excited to talk about it. There were news clips of frantic activity on the New York Stock Exchange tradefloor, pundits pontificating and speculators…speculating. Poor Georgie looked like he was going to blow a gasket 👇🏾
Given the bulk of our portfolio is invested in low cost index funds that track the market, our portfolio went along for the ride downward. Put another way, our 401(k) account got it’s a$$ whooped like a kid that let a cuss word slip at Grandma’s house. Just weeks prior, we were sitting on our couch toasting to another seemingly magical $10K bump overnight as the market was breaking new record highs. Then, out of nowhere, we’d lost about $30K between the two of us over a few days. For perspective, this is what that looks like using the dashboard in Personal Capital.
However, we know that the market is cyclical and don’t overreact to dips like this. In fact, we see these declines as Black Friday sales on stocks and just keep buying; except now at a discount giving us even more potential upside on the backend. This form of “aggressive patience” is only really visible when you stretch out your view across wider periods of time than the four months shown above. Here’s a look at how our 401 (k) has performed over the last year,
From this perspective, the a$$ kicking of late January/February is a minor pothole compared to the steadier climb upward we’ve experienced over the last year. No, it’s not Bobby Brown gumby growth, but it’s steadily rising.
This is why we kinda celebrate when the market nosedives because we just continue to invest at a lower cost to us given the corresponding drop in [index] mutual fund prices. This is also the result of having a long term mindset, understanding how markets work and yes, you guessed it… having aggressive patience.
I’ve spoken to a lot of boomers and older Gen X’ers over the last few years and I can’t tell you how many times I’ve heard them express regret for not hanging on or not purchasing stocks at bottom-of-the-barrell prices when they had a chance. Many of them cashed out in 2008/2009, dipped into their retirement early to stay afloat or re-allocated to less volatile funds. This is understandeable if you’re faced with no other alternative but having witnessed the incredible ride over the last ten years and as students of history, we don’t want to make those same mistakes. So while there are times when it may feel like this…
When it’s all said and done, we believe it will be more like this…