Familiar Hard vs. Unfamiliar Hard

This weekend my wife ran the Run Rabbit Run 50 mile race in Steamboat Springs. It was her first race at such distance, and when she finished she said it was the hardest thing she’d ever done (“That was harder than childbirth” she said). I believed her. (For the record, my wife is an absolute rock star of whom I am insanely proud. Just in case there was any doubt).

This morning I went for a fairly typical mountain bike ride at the local hill, some version of which I’ve probably done 100 times.  Today’s ride included a climb up the service road, a 1+ mile climb that averages about 11%, and exceeds 15% for a few stretches. For those of you who don’t spend your free time calculating grades, that falls in the category of “awfully steep, but not impossibly steep” on a mountain bike.

Strava tells me that I have ridden the full stretch of the fire road 58 times in the last few years. Climbing the fire road is not easy. I’ve never ridden it and thought “well, that was no effort at all.” It is hard. But it is a familiar hard, and once again a bike ride has me thinking about investing.

My wife’s race this weekend was both hard AND unfamiliar. She’d never run 50 miles before. She had an idea of what it would be, how her body would respond, what she might eat, how she might feel, how much she might suffer. But she didn’t really know it until Saturday afternoon when she ran across the finish. For me, climbing the fire road is a hard thing that is familiar. I know what to expect. I know it’s steep right near the bottom and again by the tree and leg-screamingly steep into the last switchback. I know I may suffer, but I know for how long and to what extent. I know where the end is, where the grade levels off and my heart rate can return to some reasonable pace.

Investing is hard. For most of us, it can be a familiar hard, but we always have unfamiliar hards. The first time in your adult life the market drops over 25%, it’s an unfamiliar hard. The first time it drops 25% when you have real money in the markets, when the dollar value of the fall is a significant portion (or multiple) of your annual budget, that’s an unfamiliar hard.

For most people, the worst unfamiliar hard is the first bear market of your retirement. I’m always telling newly retired clients this – the first bear market is awful. You will want to panic. You don’t know what it is like yet to be retired, to have no more income, to be living off of this bucket of money, and then see it drop by A FIFTH OR MORE. Booms, 4-5 years of living expenses disappear in what feels like an instant. I can tell you all of this in advance, remind you that we’ve done the planning, the stress testing, the scenario modeling, and the portfolio survives all of this.  But that’s a bit like telling someone that childbirth is hard or an ultra endurance race is hard. Nice to have explained to you, but some knowledge is only truly acquired first hand.

The trick is to remember that unfamiliar hards become familiar hards. By the time of your third bear market in retirement, you’ll get it. Yes, it’s scary. Yes, it’s discouraging to see portfolio values fall. But you know how this ends. My wife’s second 50 miler will be hard, but it will be a familiar hard. She’ll know what the dark places feel like, how they come and go. The dark places will still come, but there will be a comfort in the familiarity that makes them a bit more tolerable.

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