Accepting the Bad with the Good
Accepting the Bad with the Good
On a recent trip to the southwest U.S. I had the good fortune to meet the owner of a successful restaurant. It was a local diner (some would call a “mom and pop” shop) and we arrived for brunch on a Saturday morning. The place was packed. We were informed of the 30-40 minute wait time by the hostess. As we contemplated waiting or leaving in search of a less crowded establishment, a local patron commented “it’s worth the wait”. We took a seat.
It turns out the patron was correct, the food was worth the wait. The menu was complete, the food was tasty and the prices were reasonable. It became obvious why we had to wait to be seated. I shared our good experience with the owner before we left along with a congratulations for his successful business. He modestly replied “thank you” and commented that he wished every day were like that day. Sensing he had more to share, I asked what he meant. He went on to explain that his profits are made in two or three days a week. The rest of the days are either break even or a net loss. Without further prompting, he added that several years ago he decided to close four days per week and only open on the good days. This decision, he stated, nearly forced him to close. Within six months those “good days” were no longer good. He said that while the food and service had not changed, customers just stopped coming. The lesson, he explained, was that in the restaurant business, people desire continuity. His decision to accept only the good days and eliminate the bad nearly cost him everything.
As I digested what the owner had shared (along with the large portion of food I consumed) I began to realize the similarities between the restaurant business and capital market investing. If only we could somehow avoid the bad days and participate only in the good ones! Over the past thirty years, the stock market1 has averaged about 11% per year. This return includes the good times and the bad times. I wonder what the return would be if we excluded the bad days?
It’s fun to consider the “what-ifs” but in reality the bad days are part of the equation. The restaurant owner has a successful business because the good days outweigh the bad over time, netting a positive return. We could say the same about the stock market. It has been my experience that investing is much less stressful when market declines are viewed as integral to investing; therefore an expectation, rather than something to fear or try to avoid.
The next time you are feeling down because stock prices have declined go to your favorite restaurant and order your favorite meal. The owner will appreciate it and you may just turn a bad day into a good one!
