What A Delayed Train Taught Me About Investing?

My train was delayed this morning.

You know the feeling. Your alarm went off at some god forsaken hour, you put on your best suits, slipped into your latest high heels and walked confidently into the train station and then…

Bam!

There’s a fault with a train and it got cancelled. Worse, it’s stuck somewhere out of sight so no other trains could pass it.

You had no way to get to work.

Anger, frustration, cursing. Oh yes, I’ve been down there. In fact at happened to me this morning when my 7am train was cancelled for exactly these reasons.

The one good thing about transport delay was that you got time to kill, tons of it, which gabe me time to think, reflect and blog.

What I found was that there were so many parallels between dealing with delayed trains and investing.

1. Shit happens

Unexpected negative events will happen, no matter how much preparation (or lack of) you do:

  • Trains will break down;
  • If you get new trains, then train tracks might be weathered and eventually gets damaged;
  • If you get new trains and tracks, then there might be a power cut;
  • If you invest in a state of art power plant then someone might ignore a traffic light, cross the railway at the wrong moment and get hit, halting the entire network

These are all real events which I have experienced on my commuter train in the past 3 years. It’s just a matter of life.

Equally when you are investing:

  • A small software bug in Tesla might ground their entire production line to a halt;
  • It could take 2-3 days to fix the bug and resume production;
  • Unfortunately the timing of this break down was at the end of the reporting quarter, causing it to miss the quarterly production target;
  • News got out, Tesla share got  trashed by 10% because there were high hopes in the market;
  • You happened to be heavily invested in Tesla and thus your portfolio value declines.

Again, these are real events and you simply cannot do anything to control the origin, progression and outcome.

Simply acknowledge the fact that shit happens in life and move on.

2. You will be shocked but preparation can lighten the blow

The most common reaction in people when faced with an unexpected adversity like cancelled trains and market crash is shock. It’s a natural human reaction. Shock can set off a list of other emotions (like panic) that are not beneficial to help us to make the best decisions.

One way to alleviate shock is through preparation.

As the old saying goes, proper preparation prevents piss poor performance.

I already knew my train was being severely delayed because I checked the live status on the train app before leaving the house. I went into the station with the full knowledge that it would be a difficult journey, which levelled my expectations and enabled me to more calmly assess the situation.

Similarly I’m in the process of creating an action plan for the eventual upcoming market correction, which will inevitably happen one day as I learnt from #1. Having such blueprint will enable me to prepare mentally for it and stops shock and fear from hijacking my hands to make irrational trading decisions.

3. Panic does no good

Whenever train delays happen, I tend to see 2 types of people:

  1. One group would curse and complain, rushing around like headless chickens scrambling for the next available train.
  2. The other group would simply accept the fate and calmly assess the situation to take life one stride at a time.

Yesterday on the platform, the station manager made an announcement that as a result of the disruption, the next available train to London would leave at 0650. However when I checked the status of that train, it hadn’t even departed from its origin station and I knew the congestion was between that origin station and mine. So I stuck to my guns and calmly waited for my original train (0643) which I knew had already cleared the congestion based on the live status.

Thankfully I was right. The 0650 train was cancelled due to severe congestion and my 0643 train was the only one that made it out of the station during the rush hour.

In times of market correction, most people will be panic selling. That by its very nature is the definition of a correction. However panic never hits the target. It tends to overshoot.

This creates a value arbitrage where the nominal value is lower than the intrinsic value, creating an opportunity for profit.

Going against the crowd wisdom in times like this (and in life in general) is an extremely valuable asset.

4. Things will recover, always

By the time it hit 10am, the diligent railway engineers had fixed the broken electric wires, towed away that lazy train and reopened all tracks. Everything was running smoothly as if nothing had ever happened.

I’m a forever optimist and I firmly believe in humanity’s innate nature to improve and strive for the betterment of itself. Consequently I believe things will always recover and exceed the previous peaks. That is how we progress as a society.

Wrap up

The next time there’s a delayed train (or a stock market correction), don’t panic. Shit happens. Do what you can do prepare yourself and then take it one step at a time. Things will always get better.

Do you agree? I would love to hear your thoughts on this matter. As usual, please comment away.