Overcoming adversity, is the key to success

My girls are soccer players. They have tried other sports, and while they are definitely athletes, soccer is in
their hearts. They started playing a very long time ago and it has been amazing to be a part of their
journey. But their journey was not always a smooth one. They left their first soccer club when things were
going against them, not that they did anything wrong, but politics can certainly get in the way. Despite the
negative situation they found a new club, learned, grew, and moved on until they found their current club
several years ago. It was not an easy path, but the adversity that they faced along the way made them not
only stronger, better players and teammates, but also better people.

Bad things are going to happen. That is a certainty. There is so much beyond our control, but we can
choose how we respond to adversity. We control what we can shape these negative occurrences into.
The market’s decline last year was not fun to endure. While never fun, these negative periods of time are

very common. Historically the capital markets decline 14%+/- in a typical year. About every five or six-
years temporary declines in excess of 20% can be expected. Given these dramatic fluctuations why would

anyone want to invest their hard-earned savings into such a volatile situation? Compound these historical
fluctuations with the disaster du jour (recession, debt ceiling, collapse of the dollar, etc.) and one can see
why the average investor reacts, and typically underperforms not only the markets, but their own

However, since risk and return are inextricably intertwined the capital markets have averaged annualized
rates of return of 10%+/-. This does not occur every year, but over longer-periods of time the markets have
continued to generate about 10% per year. This happens despite all of the fluctuations in the market, and
warnings from financial “gurus” and the media about how the world is always on the verge of ending.
No one said that the road to long-term wealth and financial independence would be easy. If it were easy,
everyone would be successful at it. There is always a disaster being promoted as the beginning of the end,
or at least what will precipitate significant declines in the values of our hard-earned assets. These
“disasters” pass, publicly traded businesses adapt and continue to thrive, and we move on to the next
supposed apocalypse.

All of these dire predictions occur while publicly traded businesses increase their dividends by an average of
6% a year. Over time the value of the shares of these businesses increase at an annualized rate of return of
10%, about 7% above the rate of inflation. After all, that is the key. To generate a rate of return that allows
you to maintain your purchasing power so that you can maintain your financial independence as best as

The world is not an easy place. We are constantly bombarded with challenges and change. By focusing on
the longer-term, and using these obstacles as the new way forward, we can learn and become stronger
from these short-term periods of adversity. We will succeed when we choose to accept the negative, and
turn it into positive, new opportunities.