My time as a Paratrooper in the Israel Defense Forces was the greatest, most challenging and most memorable experience of my life. I learned a lot of lessons that have prepared me well for my business. Here's one story that prepared me for dealing with crazy markets...
One night we’re moving from our guard post in the south of Israel to the border of Lebanon up north. We get to the new base in the dead of night and immediately have to replace the unit that had been stationed there for the past few months. As luck would have it, I drew the first guard shift overlooking the border that night at about 3am. After a very, very short security briefing (in Hebrew….at a point of my service in which I was definitely NOT totally comfortable speaking the language) …I go out to my post.
It’s the middle of the night, so it’s dark, quiet, cold and I can’t see very far ahead of me. I really didn’t know how close or far any potential threat is…(The briefing was rushed and I understood AT BEST every fourth word...really...I'm only slightly exaggerating!!) So, at night, on a border, every sound feels like, well, like you’re alone on a hostile military border…It’s a little intense. I hear some crazy noises throughout the night and I’m thinking “holy sht this is it. I, Gideon Drucker, am the first line of defense right now for the state of Israel…this cannot be good!!”
My heart is bursting and and I get on the walkie to speak with my friend Yarden whose on an opposite post…We start talking, I do a security check... and there's nothing there. Eventually, I relax a bit and i realize I haven't heard anything for hours...I left my shift a few hours later mostly forgetting about the hour of panic that had consumed my entire being.
The next day, getting to look out from where I was in the day time, I had to laugh at myself. I saw that I had actually been standing a solid 100 yards away from the real border with Lebanon and that there was a wide open field extending another quarter mile from the nearest Lebanese town…IE there was no way what I heard was anything other than a cat or bird and I had been driving myself crazy over nothing. If I had just been able to see out in the distance or had better information at the start, it would have been a walk in the park shift…and any noises or weirdness along the way would have been totally manageable and normal and not anything to fret about. (Are you seeing the parable here???)
So….back to my current job guarding my clients' financial future…
The market has been increasingly volatile of late…A few weeks ago, on a Thursday and Friday, the S & P went down 700 points and 400 points respectively. The financial media did what they do in declaring the world coming to an end and investors naturally started to panic. But why has there been SO much excessive fear? Because the past 7 years have been so consistently positive with so little volatility that any downturn now seems apocalyptic…we’ve gotten too comfortable! Volatility is normal! From 1980 through 2016, as an example, “the market” (using the S & P 500 as a guide for the stock market) has had an average inter-year swing of 14% annually!!* …In other words, stuff goes up and down a lot! Owning equities is supposed to be more volatile than other assets…that’s why going back all the way through 1926 (!!!), they've consistently provided substantially better returns than conservative asset classes like bonds or cash (more short term risk= more long term reward) and its why EVERY single 20 year rolling period through this same 80 year+ period has had positive returns...even with all that craziness/volatility along the way. As long as we know we're in it for the long term...and we are...we shouldn't sweat the temporary declines.
Moral of my story? As long as we've done our intelligence...aka we know what our goals are, what our plan is, and how long we have to bring the plan to fruition, we shouldn’t be mistaking an innocent sound in the middle of the night for an attack coming across the border!
* Market statistics based on Nick Murray Company from Nick Murray's book Simple Wealth, Inevitable Wealth & from J.P. Morgan Asset Management Guide to the Markets 2017……S&P 500 is an index of 500 blue chip stocks, considered to be representative of the overall stock market. The performance of an unmanaged index is not indicative of the performance of any specific investment.