Let’s pretend for a moment that the information in my book is truly differentiating. A way to invest and win all the time. Why can’t people stick with it?
Reading this article on blackjack card counting titled ’surviving the continuous chain of disappointments’ helps understand why.
The key to Thorp’s system was the ability to survive losing long enough for the 2% edge to materialize. It meant constantly absorbing manageable damage. Many people can’t, or refuse to, do that.
Here’s a guy who had a definitive system to beat the casino… over the long term. But, people who tried to learn the system from him couldn’t stomach the short term swings, knowing full well they had the long term advantage.
A 2% edge is enough to secure a fortune in the long run. But it also promises hell in the short run, since Thorp was still likely to lose about half his hands.
If you’re building wealth for the long haul using the dividend aristocrats and dividend reinvesting, and you glance at the size of your elephant (your portfolio balance) instead of your paycheck you’re going to feel unnerved at times. A lot of times.
It’s a perfectly normal feeling to have given the circumstances.
Hang in there. We have one advantage over the card players. When the “market is down” our reinvestments accelerate our raises (because we’re reinvesting when the stock price is lower, and so the dividend yield that we’re “locking in” is higher — seriously, read my book). Think about the extra paycheck you’ll have, instead of the lower balance on your statement, and keep steady.
Remember, you’re in it for the long term. The raises you get will compound for the rest of your life. That feeling of seeing your Elephant’s Paycheck grow over time will outlast any temporary setbacks due to market volatility, no matter how painful.
Let me know what you think