Page 157 - Morgan Housel - The Psychology of Money_ Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

mammoth losses that were previously shielded by accounting maneuvers.
The penny gains of Welch’s era became dime losses today.
COBACOBA

The strangest example of this comes from failed mortgage giants Freddie
Mac and Fannie Mae, which in the early 2000s were caught under-reporting

current earnings by billions of dollars with the intention of spreading those
gains out over future periods to give investors the illusion of smoothness
and predictability.⁵³ The illusion of not having to pay the price.

The question is: Why do so many people who are willing to pay the price of
cars, houses, food, and vacations try so hard to avoid paying the price of
good investment returns?

The answer is simple: The price of investing success is not immediately
obvious. It’s not a price tag you can see, so when the bill comes due it
doesn’t feel like a fee for getting something good. It feels like a fine for
doing something wrong. And while people are generally fine with paying

fees, fines are supposed to be avoided. You’re supposed to make decisions
that preempt and avoid fines. Traffic fines and IRS fines mean you did
something wrong and deserve to be punished. The natural response for
anyone who watches their wealth decline and views that drop as a fine is to
avoid future fines.

It sounds trivial, but thinking of market volatility as a fee rather than a fine
is an important part of developing the kind of mindset that lets you stick
around long enough for investing gains to work in your favor.

Few investors have the disposition to say, “I’m actually fine if I lose 20% of
my money.” This is doubly true for new investors who have never
experienced a 20% decline.

But if you view volatility as a fee, things look different.

Disneyland tickets cost $100. But you get an awesome day with your kids
you’ll never forget. Last year more than 18 million people thought that fee