It's Not As Easy As You Think

We are human after all....

In investing, saying “I will be greedy when others are fearful” is easier said than done, because people underestimate how much their views and goals can change when markets break. - Morgan Housel, “Same as Ever”

One of my favorite movies is Sully, the story of pilot Chesley Sullenberger, who successfully landed an Airbus A320 in the Hudson River on January 15, 2009, after both engines were damaged by birds.

Sully made a judgement call after the birds hit; he believed they wouldn’t be able to reach nearby airports without putting everyone at risk. So, the Hudson river it was.

The result? All 155 passengers survived. Not a single death - truly a miracle.

Hear from someone who was sitting front row on that plane.

But after the dust settled and everyone was safe, investigators began questioning Sully’s decision.

They ran computer simulations and claimed that Sully could’ve reached a nearby airport. Suddenly, his heroic actions were being criticized as reckless.

Then Sully counters.

He pointed out that in every simulation, the test pilots had immediately turned toward an airport as soon as the birds hit.

There was no pause to consider the severity of the situation, no time spent assessing the danger. And of course, no real lives were at stake.

Not to mention it supposedly took them 17 attempts to successfully complete the simulation…

Computer simulations are great, but they don’t for the human element - the stress, the stakes, the unknowns.

Eventually, the committee accepted this fact and adjusted the simulations to allow for a 35-second delay before the test pilots were allowed to divert the plane to a nearby airport.

Once that was factored in, it was clear: Sully and his team had made the right call. Without his decision, the plane likely would have crashed short of the runway or worse—into buildings.

Why do I love this story?

Well, for starters, I might be a little twisted.

But more importantly, this story relates to personal finance.

Many of us are fortunate to live in an age where we can Google or ask ChatGPT any question and get a well-researched answer in seconds.

There are countless books on personal finance that offer tips on how to handle money and invest wisely.

It almost feels like we have the answers to the test. Yet so many people still struggle with managing their finances effectively or discover that it’s not as simple as they thought.

We’ve all heard the overused Buffett line - “be greedy when others are fearful”.

On the surface, it makes sense. Historically, when stocks fall, it presents a great buying opportunity.

But in reality, 95% of retail investors don’t invest during these moments of fear.

Why?

Human emotions.

It’s easy to say, “if the market drops 30%, I’ll buy more.”

But that statement doesn’t consider the bigger picture—the events causing the market to fall. Whether it’s a financial crisis, a global pandemic, or war, there will be plenty of reasons to feel uneasy and think, “Maybe I’ll wait until this storm passes.”

The Great Financial Crisis, in hindsight, was a once-in-a generation buying opportunity.

Yet many didn’t participate and frankly are still scarred from that time period.

It’s easy to forget the fear that everyone was feeling - banks were failing, investments crashing, hell, people were skeptical that if they went to an ATM, they wouldn’t be able to withdraw their cash.

Would you have had the courage to invest in that environment?

On the flip side, consider today’s market. Some argue we’re in a bubble driven by the hype around AI. “Seven stocks are driving the market!!” You might think, “Let me wait for the market to come down a bit before I invest more capital.”

Perfectly rational and emotional response. But it can also cause people to be overly conservative with long-term investments and miss out on significant gains

I still know people who have been sitting in money markets since October 2022. Meanwhile, the S&P 500 has gained 60% since then…

I’m sure there’s a book out there that would tell you that wasn’t the best financial decision.

How can you avoid this?

The key is setting rules for yourself and implementing disciplined saving habits.

This helps limit how much emotions influence your decisions. If you save systematically, you’re operating within a system.

You don’t care if the markets are up, down, or sideways - you just keep moving forward.

Not to mention that a high savings rate can help you learn to live on less, even as you have more to invest.

Sure, maybe it’s not sexy and may seem overly simplistic.

But you’re focusing on the fundamentals that truly matter.

Everyone likes to claim they’re long-term investors and that they “get it”.

But as Housel eloquently puts it,

Long term is harder than most people imagine, which is why it’s more lucrative than many people assume.

Disclosure: This material is for general information only and is not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

All indices are unmanaged and may not be invested into directly.

All investing includes risks, including fluctuating prices and loss of principal.