Whether or not you're a die-hard NFL fan, you can appreciate the story of Trevor Lawrence. He became the starting quarterback of his high school team as a sophomore, and then led them to 41 straight victories and three state championships.1 In his freshman year at Clemson University he led his team to an undefeated season and the national championship. His first loss as a quarterback came at the end of his college sophomore season in his return to the national championship. He would lose only one more time as a collegian, again in the playoffs.
Opting not to play his senior year, Lawrence was chosen number one in the NFL draft by the Jacksonville Jaguars. The team had earned the right of first choice with their dismal 1 win and 15 loss record for the previous season. But they had reason to hope. Not only were they getting a winning quarterback, but they also hired one of the most successful head coaches in the history of college football. Urban Meyer had been remarkably successful at four different major schools.2
However, so-called sure-fire winning formulas often have a way of not working out.
In the first five games of his rookie season, Lawrence more than doubled the number of losses he'd experienced in the first six years of his career. The Jaguars went on to win just 3 of their 17 games. And at the end of the season an obviously matured Lawrence said that he still loved football, even with its ups and downs, adding that he didn't need success on the field to have worth as a person.3
It's tough to lose after you've only known winning. And a similar reckoning has arrived for many investors (especially younger ones) who have never experienced anything but a rising market. In recent years many were not satisfied with the double-digit gains of the indexes and instead chased "real" gains in tech enabled instruments like cryptocurrency and NFTs, and gamified stock trading platforms like Robinhood.4
One of the problems with trading only during a bull market is that you start to believe your success is due to your own skill. Hersh Shefrin, an economist specializing in behavioral finance, says that everyone feels smart when they're making money.
But it's the inevitable down markets that are the true test of your discipline and resolve.
"It takes a bear market and the experience of losses for us to start to distinguish between our own luck and skill," says Michael Kitces, head of planning strategy at Buckingham Wealth Partners.
While everyone likes to back winners (both in football and investing), it's actually the people without the winning record who may be showing the most character. When you discipline yourself and put in the work and still don't come out ahead, it's tempting to quit.
But if you keep doing the right things, behaving like you expect to win, you can be in a better position to succeed when the opportunity comes. This is true in sports and when investing for the long-term.
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