Fishing Requires Patience

One of my favorite memories of growing up in Stockholm, Sweden, was fishing with my grandfather. “It’s time to teach you how to fish. We’ll head out early tomorrow,” my grandfather told me one day. I was ecstatic! I was going to catch some fish!

”In economics, things take longer to happen than you think they will, and then they happen faster than you thought they could.”
—Rudiger Dornbush, German economist (1942-2002)

The next morning, my grandfather woke me up. As I stumbled sleepily out of bed, I looked at the clock. “Grandpa, I think your watch is broken. It’s only five o’clock!” “Actually,” he replied, “we are running late. Now get dressed.”

As we jumped on our bikes and rode down to the lake, my excitement returned. I was about to catch some fish; I was sure of it. After getting both our poles prepared and baited, we were finally ready. “It’s going to happen any time now,” I thought. Time passed, and we still had not caught anything. I asked my grandfather if we were ever going to catch any fish. “I am not sure, but many things in life take longer to play out than we think they will. We need to have patience,” he said. More time passed, and just as I was ready to give up, I caught my first fish—a moment I will never forget.

My grandfather’s words have stuck with me my whole life. Moreover, it’s an important lesson we use here at Bragg Financial when building portfolios and making investment decisions. Market events often take a long time to play out. And then, like that fish taking my hook, things can happen fast! An informed investor may correctly predict that a stock will fall, that interest rates will rise, that real estate is a bargain, or that inflation is transitory. But the hard part is predicting when these things will happen and having the patience to wait for events to unfold. Often, we grow tired of waiting and give up on our prediction far too soon. Perhaps the German economist Rudiger Dornbusch said it best: ”In economics, things take longer to happen than you think they will, and then they happen faster than you thought they could.”

A recent example is inflation. When inflation shot up as the world was recovering from the COVID epidemic, a fierce debate raged among economists and the investment community about whether this was a transitory phenomenon. Meanwhile, high inflation continued, with food and energy prices spiking. People began to believe we had entered into an extended period of spiraling prices that would lead to increasingly higher interest rates and ultimately the strong possibility of recession.

But after two years, we can now confirm that inflation was indeed transitory and that the supply disruptions and shifts in demand that drove it were temporary. It turns out that patience and deliberation were the wisest choices for investors. Precipitous actions, such as selling off stocks in fear of a recessionary market plunge, would not have worked out well.

There are many other examples illustrating how economic trends can take extended periods of time to unspool, underlining the wisdom of patient investing. One is how investors interpreted and reacted to the course of interest rates over the last decades. Interest rates had quite a journey from their highest point in 1981 to hitting rock bottom in 2021. After reaching a record high in 1981, they gradually dropped over many years, continually surprising those who kept predicting they would go back up. The long period of low rates affected borrowing costs, investment decisions, and monetary policy. Defying expectations for decades, the long period of low rates illustrates how things can take a long time to play out.

Another good example is the Global Financial Crisis of 2007–08. The stock market peaked in October 2007 and didn’t bottom out until March 2009. That year and a half was a tough and uncertain time for investors. What’s interesting is that during that time, as the market kept going down, commentators and investors kept trying to call the bottom, hoping to jump back in at the right time. This is a good example of how economic ups and downs and market responses often take more time than we expect. It pays for investors to be patient and disciplined as they navigate through the financial markets.

The lesson is clear: whether in life, fishing, or investing, things can take longer to materialize than you might expect. Events unfold at their own pace, and it’s not to investors’ advantage to try to outguess them or time these events. You are much better off focusing on your long-term investment plan. Here at Bragg Financial, we focus on building diversified portfolios, knowing that over the long run, even over decades, each sector will deliver the long-term risk-adjusted performance we expect.

This information is believed to be accurate but should not be used as specific investment or tax advice. You should always consult your tax professional or other advisors before acting on the ideas presented here.