When Investing for Retirement, Be Like Rip Van Winkle

A man lies on his back in the grass with his eyes closed.

(Image credit: Getty Images)

published 9 June 2024

I love a good children’s fairy tale. Those stories have a way of teaching us a message without us feeling like it is learning. We simply get lost in the story, and the next thing we know, boom, message learned. I thought I would take a shot at making a parallel to one of my favorite children’s books with Rip Van Winkle.

Now, I know what you are thinking, and no, I don’t love this story because it is about a drunkard who goes hunting to avoid his wife’s nagging only to meet a friendly Dutchman who offers him booze, causing him to pass out for 20 years. Funny, as I recap the story, it seems odd that this is a children’s book, no?

The investing analogy

Rather, I tell clients this story quite often as an analogy to investing. You see, much like Rip Van Winkle, the world goes on with or without us. Things evolve, economies mature, and markets grow. More pertinent, the markets continue to ebb and flow in an upward trajectory.

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I’ll often tell people that if they look at the stock market every day and dwell over its gyrations, they will go insane, and trust me, I’ve tried — why else do you think I’m writing an article about Rip Van Winkle? The only thing accomplished by looking at and putting so much emotion into the daily swings of the markets is increased anxiety. What happens when you have increased anxiety, one may ask? Simple, we tend to do something ill-advised or emotionally charged, when the markets just don’t care.

While Rip Van Winkle was away, his village grew, his kids had children, and his wife passed away. These things happened irrespective of the fact that Rip was in a drunken stupor for 20 years. Much the same happens whether you freak out over the stock markets, pay no attention at all or get your CFA designation — the markets simply don’t care. They will continue to ebb and flow with or without your investment. That is why I often give this advice: Be Rip Van Winkle — you’ll be happier, less stressed and, magically enough, get 100% of the market growth that you very much deserve.

Let’s go back in time

Let me take a moment to drive my point home. If we looked back 20 years — yes, to a time before iPhones when BlackBerrys ruled — and studied the markets, we would learn some very important data. The Dow Jones was at about 10,315, while the S&P 500 was at about 1,100. Over those 20 years, we have witnessed an insane number of happenings in the world around us and, subsequently, the stock markets. We saw the Great Recession, the global pandemic, multiple wars, Brexit, hyperinflation and like 50 rounds of quantitative easing, just to name a few.

Think back on your own life of what happened during those 20 years — it is quite humbling. Now, if we fast-forward to the present, we have a Dow Jones close to 40,000 and an S&P at about 5,300 — about four to five times their values 20 years ago. Astonishing, right? It was far from a straight line, of course. Heck, in 2008, these indexes were both below their 2004 values, again causing mass panic to those who were tuned in. As a matter of fact, I still have new clients come in who are feeling the aftermath of those years, refusing to believe in the markets ever again. Which, as you can see, is a real shame since if they’d listened to Mr. Van Winkle, they would have multiples of their assets by simply doing nothing.

You see what I just did there, folks? You were reading a nice little story about a children’s book, and boom, you learned a hugely important investing lesson without you even noticing. I can’t stress enough that trust, faith and 20 years in a stupor will do wonders for your investment portfolio!

In the words of Rip Van Winkle, stay wealthy, healthy and happy, everyone.

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Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

In March 2010, Andrew Rosen joined Diversified, bringing with him nine years of financial industry experience. As a financial planner, Andrew forges lifelong relationships with clients, coaching them through all stages of life. He has obtained his Series 6, 7 and 63, along with property/casualty and health/life insurance licenses. Andrew consistently delivers high-level, concierge service to all clients.