When I was five, I wandered into the ocean surf with my wallet in my bathing suit pocket. That Velcro wallet contained my life savings, two twenty-dollar bills. After tossing around in the waves with my father for some time, I slowly realized I had lost my wallet. I say “slowly realized” because as a five-year old I did not readily accept that my wallet was lost. I insisted on searching the ocean. I was going to find wallet. My father kindly played along. We searched for an eternity comprised of what was surely no more than ten minutes.
It was a fruitless task. My wallet was gone forever and, with it, all the money I had accrued in my short life.
The experience offered more good lessons than I could absorb at that tender age. Don’t put all your money in one place. Happiness is relative (I recall being more upset about losing the wallet than the money). The world doesn’t care if you are risk-averse or risk-tolerant. Your actions grant the universe, and its attendant markets, all the permission it needs to make that decision for you. Loss hurts.
There is no best way to prepare for loss. One might understand a risky proposition before engaging in it. That does little to lessen the blow because acknowledgment is poor substitute for feeling. For example, if you go into the ocean with something in your pocket and accept that it might be lost forever, you still have no way to anticipate the feeling of that loss. Ever preface an explanation with, “I’ll tell you, but you have to promise not to be mad/sad/etc?” It’s not an effective strategy.
As an adult, it has become clear that there really are only two things you can lose when you invest: time and money. Both are valuable and our awareness of that fact should imbue us with some vigilance, though, humans are quick to forget.
See, not much has changed in the past 30 years. On occasional I still proverbially lose my wallet in the ocean. I recently invested a few hours of my time writing the first post for Education of an Investor. This being the only time I’ve run a blog, it didn’t take long to accidentally delete all my work. The words were gone, but it was my time that was lost. It hurt, in great part, because I forgotten that I was even invested (with regard to my time and mental energy) and that there was any risk (I never imagined it’d be so easy to erase my work).
Now, I am mentally primed for such contingencies, though emotionally not so much. That being said, I’m happy to announce I’ve mitigated nearly all of the risk; I write my posts in Microsoft Word first, before copying and pasting them here.