On my journey to financial freedom, I’m consistently striving to learn as much as I can from others who have done it before me.
This week, I read a few great blog posts from some of my favorite authors and bloggers.
Let’s take a look and see what we can learn together.
What to do in a bear market.
JL Collins recently posted about the big mistake that people make during bear markets. A bear market is when the stock market drops by 20%.
Collins is one of my favorite authors on investing. He just released the new edition to his best-selling book, The Simple Path to Wealth.
I highly recommend you pick up a copy if you are interested in learning the easy way to invest and grow your net worth.
Back to the question at hand:
As an investor, what should you do during a bear market?
Nothing!
Easier said than done, right?
Human instinct is to act. Our natural instinct tells us to do something when confronted with danger. We’ve all heard the saying, “fight or flight.” It’s our body’s way of protecting us from potential harm.
For example, if you encounter a bear in the woods, despite what survival experts may tell you, I’m betting you’re running for your life in the opposite direction.
That’s exactly what my wife and I did when we saw a black bear in Colorado a couple summers ago.
Even though we were at least 100 yards away when we saw the bear, and the bear was walking away from us, we ran in the opposite direction as fast as we could.
Survival experts, we are not.
If you zoom in (and squint), you can see the ferocious beast in this picture.
When it comes to investing, the saying should be modified to include a third option: “fight or flight or do nothing.”
And as JL points out, doing nothing is usually the best decision.
When the market drops, you have the chance to buy stocks at a discount. Whenever the market bounces back, you will benefit from all those discounted stocks you purchased.
Of course, nobody knows when the market will bounce back. For that matter, nobody knows when it’s going to drop, either. However, history has shown us that the market has always recovered.
What if the market doesn’t recover?
Then, we all have bigger problems to worry about than our money.
It may take a long time for the market to recover. That’s OK. When you invest early and often, time is on your side.
By combining time and the courage to do nothing, you will benefit immensely in the long run.
The Rise of Middle Class Multi-Millionaires
Another one of my favorite authors and bloggers, Financial Samurai, recently posted about the rise of middle class, multi-millionaires.
If you haven’t picked up a copy of his new book, Millionaire Milestones, I highly recommend it. I recently ranked it as one of my favorite money mindset books.
You can read my full review of Millionaire Milestones here.
In his post on middle class multi-millionaires, Financial Samurai raises a great point:
How come people are so enthralled by high incomes instead of high net worths?
Like me, have you wondered why people tend to be more interested in someone’s salary rather than his net worth?
I have one theory for why society continues to value income more than net worth: income can be more easily measured and more easily used for marketing purposes.
To put it another way: income is sexier than net worth.
One example I thought of: remember when you applied to college, grad school, law school, etc.?
Did you notice how schools commonly advertise the average or median income of their graduates. Schools love to show off that if you go to their school, you’ll make a certain amount of money upon graduating.
However, you’ll never see data on the net worth of its graduates.
Why is that?
Because an impressive net worths can take decades of discipline to manifest. That type of slow progress doesn’t make for sexy marketing for schools.
Plus, a top flight education may help you earn a high income but doesn’t guarantee a high net worth. Many high earners are also high spenders. You’d be surprised how many people are good at making money but not keeping it.
It’s up to each of us to turn that income into a high net worth. Again, that’s harder for schools to market.
If you are a personal finance enthusiast, you know to value net worth more than income. In fact, the most impressive feat of all is when you have a high net worth on just a standard income.
For my kids, I’d be way more impressed to see what schools crank out students with high net worths 20-30 years after graduation instead of the median income upon graduation.
To learn how and why to track your net worth, you can read my post here.
Does early retirement negatively impact your life expectancy?
I read a fascinating post on Early Retirement Now that looked at the potential consequences of someone’s life expectancy based on when that person retires.
There has been a lot of academic research done on the topic. Somewhat surprisingly, there are studies that indicate retiring early may negatively impact your life expectancy.
Check out the post on Early Retirement Now for a closer look at some of these studies.
I’m not too worried about the conclusions about life expectancy based on when someone retires. At best, there are conflicting studies on that question.
Rather, what I found most interesting about the post was that I’ve rarely thought about the potential health consequences about retiring early.
I regularly think about the mental side of retiring early. Specifically, how does someone keep his mind sharp in early retirement?
This is one of the main reasons I believe in FIPE not FIRE.
However, I’ve never really thought about the physical effects of retiring early.
Does retiring early negatively impact your physical health?
I may have mistakenly assumed that someone’s physical health would automatically peak in early retirement. I’ve based that assumption on the idea that you’ll have so much time to exercise and eat right when you don’t have to worry about a job.
In other words, if you’re not spending 50+ hours per week sitting at a desk, there would be no excuse to skip out on exercising regularly and preparing healthy meals at home.
This post has me thinking about other factors I’ve failed to consider.
For one, your body may trend towards lethargy if you’re not forced to wake up, get dressed and work 50+ hours per week. Plus, as much as people may not like commuting, at least it gets you out of the house and moving around.
My takeaway is that if you’re considering retiring early, be sure to plan ahead for physical activity as much as mental activity.
Your body may not want to exercise every day. You may need a motivational boost from group exercise classes or clubs. Maybe you’ll need a personal trainer or coach.
If you don’t currently have any hobbies tied to physical activity, I would suggest exploring different options before you leave full-time employment. It may take some time to find your groove with an activity or two that interests you.
Let us know what you think about these posts.
What do you think about these posts from popular personal finance writers?
- Are you brave enough to do nothing in the face of a bear?
- Have you been tricked into thinking a high income is more impressive than a high net worth?
- What are your thoughts about the physical side of retiring early?
Let us know in the comments below.
