If you’ve ever been rock climbing, you’ll know that it’s easier to fall than it is to climb. You can spend twenty minutes painstakingly inching your way up the wall and then, with one misstep, you’re suddenly back where you started from. Or perhaps you’ve been running or biking. Whatever the distance you’re traveling, you can finish your course a lot faster and with a lot less energy if most of it is downhill. If you’re moving uphill, it’s a lot more difficult and requires a lot more effort to achieve the same results.
In the world of business, the falling/climbing metaphor is often used in a figurative way to convey the amount of hard work required to achieve your goals. Failure is as easy as falling. All you have to do is step back and let gravity have its way. Success, however, requires concentrated effort–more pulling, more pushing, more pedaling. If you take a break, even for a second, you might just find yourself falling back to where you’ve started. Success requires to continual, non-stop hard work.
In the world of investing, the truth that it’s easier to fall than it is to climb is even more pronounced–because it is has a mathematical emphasis. Let’s say you start with one hundred thousand dollars. If you have a 100% gain–or if you double your money–you’ll have two hundred thousand dollars. Now, let’s say you lose 50% of the money you know have. How much do you have left? One hundred thousand dollars–the same amount you started with. You only have to lose 50% of your money to cancel out the benefits of a 100% gain. In investing, falling is easier than climbing.
Because of this mathematical reality in investing, it is absolutely crucial to place an emphasis on the reduction or minimization of volatility in your portfolio. One false move can spell disaster. Whether it’s an error in judgment or a random, unforeseen even in the market, it doesn’t take much to wipe out years of growth and leave you right back where you started.
All of this being said, there is another related truth in life, business, and investing. Perhaps you are someone who has fallen. Maybe you fell off the wall just moments before reaching the top. Maybe you failed at a new business venture or lost your job. Maybe you made a bad investment and lost everything you have. Another truth relevant to each of these situations is that it’s easier to stay down than it is to get back up.
Think about it. If you put in so much effort only to fail and have nothing to show for it, it’s easy to just throw in the towel. But just because it’s the easy thing to do, that doesn’t mean it’s the right thing to do. Don’t get discouraged. If you learn from your mistakes, you’ll double your chances of success the next time around. If you lose out big in your investments, don’t give up. The great thing about the free market is that there’s always an opportunity to bounce back. So, get back up and give it another try. If you need any help understanding how to deal with the threat of failure in investing, feel free to reach out to us for a free consultation. We want to help you find the perfect balance between a reasonable caution and a relentless confidence.