What’s my exit strategy?
I don’t have one when it comes to investing. Come to think of it, I don’t have one when it comes to marriage, either.
Scratch that. I do have an exit strategy. I suppose it applies to both, and that’s death.
I approach investing as I approach marriage, with a death-do-us-part mentality. If you approach either with a more transitory mentality, that’s what you will get. You enter with the foreknowledge that you're limiting the time together – I’ll dump XYZ stock when it hits fifty and the Missus when she hits forty – you’re giving short-shrift to the relationship. You’re limiting the wealth-enhancing (material and psychic) power of compounding.
I don’t set a target price for selling a stock. I don't set a target age for divorcing a wife. Neither comes with a stop-loss limit, which I find frequently limits gains. A lower price alone is no reason to sell a stock. An illness or a calamity is no reason to divorce a wife. Had you performed the requisite due diligence at the outset, neither event would leave you nonplussed. The mentality that death is the only exit imbues the pursuit – investing and marriage – with a seriousness, a sobriety, and a resolve that is lacking if you enter with preset temporal bounds. The mentality is impossible to arouse if you're scoping the exit as you pledge your commitment.
I find it no great revelation that frequent trading and divorce are the two great inhibitors to building wealth. The former engenders taxes and poor decisions. Both eat away return. The latter mandates division and expense. If you’re dividing the property every ten years and paying to do it, as with divorce, what else would you expect but reduced wealth? Frequent trading and divorce combine the worst of both worlds: death by a thousand cuts through frequent trading, death by one major slice with divorce.
Neither wealth nor love is a linear progression. Stock prices frequently follow the inscrutable flight path of the butterfly. There is an expected direction to take, but the direction lacks linearity. Up, down, down, up, up, up, down, who knows where it will go over a day, a month, a year? Marriage exhibits a similar trait. If years are needed to measure time together, you know what I mean. Down, up, down, up, up. At times you love your spouse to the point of obsession. At other times her mere presence invokes annoyance.
The time when you are sure you have reached your limits, when you are all but certain it’s time to exit, will probably be the wrong time to exit (with two exceptions: bankruptcy with the company, abuse and infidelity with the spouse).
The stock that had lost 50% of its value in the bear market on a string of disappointing earnings begins to improve. The share price trends higher, perhaps imperceptibly at first, but more perceptibly as time passes. Something different emerges, a transformed company. It’s all good again. The share price resumes an upward trajectory.
A similar dynamic will play in the marriage. The wife loses that wild-rose beauty when she begins bearing children. She might even assume a frumpiness that tamps down sexual desire during the child-rearing years. But then the children mature and leave, she changes again. Her beauty returns, but it’s a different beauty from that in her youth, something more elegant, a beauty more akin to lily than a wild rose.
But you have to be there, or you’ll fail to benefit from the long upward progression. Being there, enduring through time, is the only way to benefit from the wealth-enhancing power of compounding. Compounding of retained earnings and dividend reinvestment on the material side. Compounding on companionship and further bonding on the relationship side. The greatest benefits materialize only over the long, long passage of time.
I don’t have one when it comes to investing. Come to think of it, I don’t have one when it comes to marriage, either.
Scratch that. I do have an exit strategy. I suppose it applies to both, and that’s death.
I approach investing as I approach marriage, with a death-do-us-part mentality. If you approach either with a more transitory mentality, that’s what you will get. You enter with the foreknowledge that you're limiting the time together – I’ll dump XYZ stock when it hits fifty and the Missus when she hits forty – you’re giving short-shrift to the relationship. You’re limiting the wealth-enhancing (material and psychic) power of compounding.
I don’t set a target price for selling a stock. I don't set a target age for divorcing a wife. Neither comes with a stop-loss limit, which I find frequently limits gains. A lower price alone is no reason to sell a stock. An illness or a calamity is no reason to divorce a wife. Had you performed the requisite due diligence at the outset, neither event would leave you nonplussed. The mentality that death is the only exit imbues the pursuit – investing and marriage – with a seriousness, a sobriety, and a resolve that is lacking if you enter with preset temporal bounds. The mentality is impossible to arouse if you're scoping the exit as you pledge your commitment.
I find it no great revelation that frequent trading and divorce are the two great inhibitors to building wealth. The former engenders taxes and poor decisions. Both eat away return. The latter mandates division and expense. If you’re dividing the property every ten years and paying to do it, as with divorce, what else would you expect but reduced wealth? Frequent trading and divorce combine the worst of both worlds: death by a thousand cuts through frequent trading, death by one major slice with divorce.
Neither wealth nor love is a linear progression. Stock prices frequently follow the inscrutable flight path of the butterfly. There is an expected direction to take, but the direction lacks linearity. Up, down, down, up, up, up, down, who knows where it will go over a day, a month, a year? Marriage exhibits a similar trait. If years are needed to measure time together, you know what I mean. Down, up, down, up, up. At times you love your spouse to the point of obsession. At other times her mere presence invokes annoyance.
The time when you are sure you have reached your limits, when you are all but certain it’s time to exit, will probably be the wrong time to exit (with two exceptions: bankruptcy with the company, abuse and infidelity with the spouse).
The stock that had lost 50% of its value in the bear market on a string of disappointing earnings begins to improve. The share price trends higher, perhaps imperceptibly at first, but more perceptibly as time passes. Something different emerges, a transformed company. It’s all good again. The share price resumes an upward trajectory.
A similar dynamic will play in the marriage. The wife loses that wild-rose beauty when she begins bearing children. She might even assume a frumpiness that tamps down sexual desire during the child-rearing years. But then the children mature and leave, she changes again. Her beauty returns, but it’s a different beauty from that in her youth, something more elegant, a beauty more akin to lily than a wild rose.
But you have to be there, or you’ll fail to benefit from the long upward progression. Being there, enduring through time, is the only way to benefit from the wealth-enhancing power of compounding. Compounding of retained earnings and dividend reinvestment on the material side. Compounding on companionship and further bonding on the relationship side. The greatest benefits materialize only over the long, long passage of time.
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