Discarding Expectations in Life and Investing

In life and in investing, your perception of where you are now is influenced by where you began and what your expectations were.

Life

Right now I'm in an apartment with my family, which is not a bad thing in itself, but I can't really go anywhere. When deciding to rent the apartment, my expectation was that I would always be able to go somewhere, that my wife would be able to go somewhere, that my kids would have many parks nearby to choose from. We are all feeling the loss of those expectations, hoping for their return, wondering how long this will be reality.

For some people it's much different. My cousin, for example, was always frugal and stayed close to home and even home schooled. Her perception of the corona crisis is much different. It's not a big change, perhaps.

So too David Geffen, waiting it all out on his yacht in the Grenadines. Maybe he would rather be in the Pacific and this is frustrating to him.

An interesting mental exercise is to discard expectation altogether and simply consider the present moment. We are here, we are healthy, we have what we need, the cat is getting fat, the balcony is nice. Forget what we "should" be doing. This is what we are doing.

Investing

I can't remember who I learned this from but it can also be useful to discard expectations in investing. It's easy to get hung up on what we paid for an investment. We expected something when we bought it. If it's up we feel good and if it's down we feel bad. 

Exxon trades at $37. If you bought Exxon in January at $70, you're not happy. If you bought Exxon a week ago at $31, you're ok.

Maybe that's all self-deception.

Try this. An interesting thing happens when you cover up the profit and loss and just look at the position. Where is it now? Would you want to own it right now, at this price? Do I want Exxon at $37? Or would I rather have my money in another company, or in cash?  Commissions are $0, there's really no barrier to adjusting your portfolio quickly and dramatically, if you want to.

With regard to the overall market, expectations can play an even bigger role. If you thought stock valuations in January were reasonable, you might look at the present moment and think this is the opportunity of a lifetime, because surely once the crisis passes we should go back to all-time highs. 

However, if you thought valuations in January were bubbly, you might look at the present and think that this is only the beginning of a bubble popping, not to mention the economic effects of a global pandemic and millions unemployed.

Both views have their merits. But maybe it's better to forget expectations. Cover up the profit and loss and ask yourself how much stock market exposure you want right here, right now, at these valuations. If you can't sleep at night because your retirement is threatened, maybe cut your risk. If you think valuations are compelling, take on risk. 

Just remember that all you have is what you have right now, in the present. You don't have what you expected; what you expected is not relevant.

Mindful / Stoic Thought: "Expectations are the greatest impediment to living. In anticipation of tomorrow, we lose today" -- Seneca