You Must Surrender Control

You Must Surrender ControlIn general most of us like to be in control of things.  Surrendering control in any facet of life usually requires faith and trust.  Riding shotgun in a car requires trust in the driver.  Taking medication demands trust in the manufacturer and the FDA. 

Control is good, and a condition of comfort and safety.

When I’m climbing a big mountain, it’s easy to feel in control.  But that’s mostly an illusion, a ruse.  I’m in control of a lot of it for sure.  My fitness, footwork, judgment, and skill are all things that I govern. 

But there’s lots I’m not in control of.  In climbing parlance we call these things “objective hazards”.  Things like rockfall, avalanches, storms, and dangers from other climbers or wildlife to name a few.  These things are mostly out of our control, and can be lethal.  

Objective hazards cannot be eliminated.  With planning and smart climbing their dangers can be mitigated somewhat, but the risk they present will always be there.

 

Stock Market = Objective Hazard

There’s lots of ways to discuss the concept of control in life.  The term locus of control is used in personal psychology to describe the degree to which people believe that they have control over the outcome of events in their lives.  JD Roth at Get Rich Slowly has done some great posts about this topic, and he dives into general control of all aspects of life, from relationships to jobs etc.

But I’m going to focus strictly on money and investments.  Like the dangers on a big mountain, the stock market is basically one big objective hazard for your money.  You can try to mitigate the hazards that come with the market by investing wisely and diversifying, but you cannot totally eliminate them.

This is from Vanguards website: 

All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss. Investments in bonds are subject to interest rate, credit, and inflation risk. Investments in stocks and bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk.

The bold italic items are out of your control.  And there are a ton they didn’t mention, probably for fear of turning new investors away.  After all, it’s not good sales practice to go into gory detail about all of the uncontrollable risks that can devalue the product you’re trying to sell.  

But when the next market crash or bear market comes – and it will come – there is one thing you have full control over. 

The actions you take based off your emotions. 

If you have a plan or strategy with your money, you can control your actions and stick to that strategy regardless of the objective hazards that will surely wreak havoc on the markets. 

You can put processes in place that force you take action (or not take action) based on your plan, not based on how you are feeling on a particular day or the movements of the markets.

 

Pot, Meet Kettle

You Must Surrender ControlFor years I begged my Mom to let me put what little money she has in the stock market.  Because she’s a child of the depression I knew this was an uphill battle.  It’s hard for someone to relinquish control of their money to something that’s failed them before.  After all, she grew up in the poverty-stricken shadow of the greatest stock market crash in history.

It never happened.  To this day my Mom has most of her cash in a bank account, probably earning 2% or less.  Slowly being eroded by inflation.  Sure, I did convince her to buy some CDs, but those barely beat inflation.  The only reason she agreed to those is the fact that they’re FDIC insured. 

That serves as control for her. 

But I also commiserate with her.  Why?

I’m generally against recommending financial advisers since most people have relatively simple financial situations.  A simple strategy of maxing out tax-free options available and buying index funds works for most.  It’s a sure path to build wealth and requires little if any time investment.

Hiring a financial adviser, however, is the ultimate in giving up control.  With a financial adviser you’re not only subject to the objective hazards of the market, you’re now also giving up control to another person.  It’s basically loss of control, squared.

In a moment of self-reflection one day, I realized that was exactly what I was asking my Mom to do – give up control of her money to the stock market and to me!  To her, I represented a financial adviser.

Pot, meet kettle.

 

Learn To Surrender What You Must

You Must Surrender ControlAs a study I previously posted about shows, many Millennials are weary of the stock market from the 2008 recession.  Becoming comfortable with relinquishing control of your money takes a mental leap. 

But to make money in the market you have to learn to surrender some control

Said another way, if you don’t risk anything, you risk even more.  Because without risk you’re unlikely to get the returns you want.

Just as I have to get over the mental hurdle of surrendering some control to the risks of avalanches, grizzly bears, and lightening storms when I climb mountains. 

If I don’t take any risks and surrender control, I surely won’t gain any summits.

Your turn financial warriors – are you comfortable with surrendering control when it comes to your money?

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Dave @ Accidental FIRE

I reached financial independence and semi-retired in my mid-40's through hard work, smart living, and investing. This blog chronicles my journey and explores many aspects of personal finance including the psychological and behavioral factors that drive our habits.

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20 Responses

  1. xrayvsn says:

    There are so many things beyond our control but if we fall prey to them we would essentially be paralyzed out of fear of doing anything.

    Driving, traveling, even eating carries with it some sort of risk. It’s a game of probabilities. Investing is certainly no exception. Sometimes you do need to give up control in order to make gains. If you are the DIY type of personality than you may assume more control but if not there is no shame giving some up for an advisor

  2. Stop Ironing Shirts says:

    I completely relate to the issue with your mom. I can’t get my in-laws to invest in the market and they will end up outliving their retirement savings. Controlling everything comes at a cost

  3. Katie Camel says:

    Interesting point about your mom’s refusal to invest in the stock market. My grandpa also lived in poverty during the Great Depression, yet he invested in the market as an adult anyway and eventually became a self-made man. He never wanted to be poor again and believed in the power of the market. It makes me think about their various levels of control and how they’ve influenced their respective lives.

  4. Dave, your story reminds me of when I convinced my mother-in-law to invest a portion of her meager savings in a Vanguard mixed stock/bond fund. She’d call me every time her statement showed “she lost money”. In the end, she was better off for it, but the struggle of losing control is real.

    • Dave @ Accidental FIRE says:

      That’s exactly what I feared if I had convinced her to go forward. As soon as she lost a penny I would have been given the riot act.

  5. i give up control every time i buy shares. if you buy growth stocks like i do the only way they really go up is when the big money comes in and buys a lot and drives up the prices. you might have selected the best business in the world but the share price won’t reflect that until the big buyers decide it is time.

    we do our best to influence sound decision making but the only thing i can do is show some examples and folks will do what they want with that.

  6. I’m not sure I ever feel comfortable, but I do it anyway because I’ve learned enough to know that ups and downs are totally normal. I guess that’s a good first step, eh? I think in general, control is something I struggle with.

    • Dave @ Accidental FIRE says:

      That is a great first step and probably the biggest one to get up on. After that things become much easier.

  7. I think education helps. I’m willing to give up some control because I understand inflation and compound interest. Putting money in the bank isn’t going to beat inflation. It’s better to invest in a good index fund. I guess it depends on your experience too. If I grew up in a prolonged depression era, I’d probably be a lot more conservative too.

    • Dave @ Accidental FIRE says:

      True about education Joe and it confounds me that basic finance is not taught in high schools. That needs to change.

  8. I have no idea if I will make it through my time now in RE after pulling the plug when I reached FI 2.5 years ago. My investments are maintaining but I have pretty much drawn down my cash holdings now so those investments will be drawn from next year. I decided that I would just surrender control to the world and go for it, I’m going to do my best to mitigate risk within my control but the more important thing I wanted to do was start living my life. Thus I am taking this big risk to just do a whole lot less, not work and see where life takes me. Maybe I’ll have to go back to work when I’m 65, but who cares because I’m going to enjoy the next 20 years while I am fit and healthy. A hold could break off on my next scramble or climb and it could all end like it did for my good friend this year. So “F” it…. I’m surrendering myself to life and just going to see what comes at me.

    • Dave @ Accidental FIRE says:

      Man, I envy your comfort level with that risk. I’m really good at taking crazy risks in the mountains or ice climbing etc, but not as much with other aspects of life. But I think I’m doing better than many others

  9. drmcfrugal says:

    Control is hard for most people to surrender. But do we really have control over the things we think we control? Probably not. There are so few things that we can actually control. These things might include our thoughts and our actions. Beyond that, there are so many variables that I would say it is impossible to control. Your mom may think she has control of her money by putting it in the bank. But she has no control over inflation risk (like you mentioned). Even banks may not be as safe as we think. In 2015, currency froze in Greece and for a period of time people couldn’t get their money out.

    I guess my point is that there is so little that we actually can control. And when we think we have control of something, it is merely our perception.

    When you realize that, it could be easier to surrender control.

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