The Subtle Art of Doing Nothing (And Making More Money While Doing It)

Tyler Gardner (0:00)

When the next downturn comes, and it will, don't look at your portfolio. Don't read financial press more than once a week. Don't call your advisor in a panic. Don't engage in theorizing about whether this one is different. Do look at your cash buffer. Do confirm it's still there. Do read the letter you wrote to your future self in calmer times. Then go take a walk, make a meal, read a book that has nothing to do with money, and let the storm move across the lake.

Hello friends, this is Tyler Gardner welcoming you to another episode of Your Money Guide on the Side, where it is my job to simplify what seems complex, add nuance to what seems simple, and learn from and alongside some of the brightest minds in money, finance, and investing. So let's get started and get you one step closer to where you need to be.

Quick note before we dive in, August pre-order incentive for my book Real Wealth is now live, and this one is my favorite so far. Pre-order this month, tell me you did at tylergardner.com/book, and I will send you a draft chapter of a new book that I'm already working on. And no, not even my editor at Norton has seen this writing yet. This sneak peek is yours to keep delivered to your inbox in early September. Pre-order today, and you're locked in for every monthly incentive through December 1st. tylergardner.com/book. Now let's get into it. In 2008, in the middle of what would become the largest financial crisis since the Great Depression, a retiree I knew, we'll call him Robert, because Robert is a perfectly fine name and not, as far as I know, attached to anyone famous enough to sue me, sat down in front of his computer one Wednesday morning in October. He had just turned 68 He had retired three years earlier with about $1.4 million, split between a traditional IRA and a taxable brokerage account. By that Wednesday in October, the balance read $911,000.

He had lost, on paper, $489,000, a third of his retirement. Robert is an engineer by training, the kind of person who reads instruction manuals before he assembles furniture, the kind of person who keeps spreadsheets of his utility bills going back to 1994

He looked at the screen. He read the news. He read more news. He read, in his words, every single article he could find on cnbc.com, which is a sentence that ought to be inscribed on the bedroom wall of every behavioral economist as a warning. And then, on that Wednesday, in October of 2008, with the market down 40% from its peak, and the financial system genuinely teetering, Robert moved his entire portfolio to cash.

Six months later, as we now know, the S&P 500 hit bottom and turned. By March 2010, it had recovered most of its losses, and by the end of 2013, it had set new all-time highs. And Robert, locked in cash, missed every single minute of it. He has, by his own accounting, spent the last 17 years with significantly less money than he would have had if he had simply done nothing on that Wednesday in October. The single most expensive decision Robert ever made was the one he made the day the news got just a little too loud. Welcome to part four of the Decumulation series, five parts, and we are four deep. Today, we're talking about market downturns in retirement, and more specifically about how to tell the difference between weather and climate when the screen turns red and your stomach does the thing it always and understandably does. This is, I want to say up front, the most philosophically loaded episode in the series, because what we're actually talking about today is not investing. It's the relationship between knowledge and panic, between forecast and fact, between the story your brain tells you in the dark and the math that keeps being true, whether you choose to believe it or not. So go grab a coffee, as this episode wanders a little bit by design. And as always, familiar ask if you found this show even remotely useful. If you've learned something about money or investing or yourself that you didn't know a few months ago, please consider leaving a review on Apple or Spotify. It helps others find the show and know what it's about, and it helps me appreciate that this day in, day out endeavor to make financial literacy free, digestible, and accessible to anyone who wants to sit through 45 minutes of talking about expense ratios and index funds is not done entirely in vain. Thank you, and let's get into it.

Part 1

Weather is not climate.