Can we learn about investing from fishing?

Photo: Doug Tengdin. All rights reserved.

I grew up fishing. My mother used to tell of how she took me out fishing when I was less than a year old. Every year My family in Minnesota would trek up to the Canadian border to fish for walleye, northern pike, and smallmouth bass. Nothing quite captures the excitement of landing a “lunker.”

But fishing can be discouraging. You can spend countless hours preparing, traveling, and getting to the water only to have the fish refuse to bite. Or we can hook one and in the excitement of setting the hook, playing the catch, reeling it in, and landing we make just one error and … well … that’s another one that got away. And it always seems to be the biggest fish that manage to escape!

When we don’t catch fish – not even a nibble – we say we didn’t have any luck: the weather was too hot or the water too rough or the wind wasn’t right or I wore the wrong socks. After all, we usually can’t see the fish, and blaming bad luck makes it seem a little less frustrating and embarrassing. Once I asked my dad why my brother always seemed be more lucky. “Doug,” he told me, “Your brother just has his line in the water more than you do.”

He was right. I was always fiddling with my lure or casting to a new location or dealing with a snarled line or some other distraction. One of the first rules of fishing: get your lure in the water!

In that way, fishing is a lot like investing. People get scared of market volatility, meaning the value of their investments could go down. And yes, risk is part of investing, just as empty casts and lost lunkers are part of fishing. But we’ll never make any gains at all if we don’t begin somewhere. The key is to get started.

There’s also a science to investing, just like there’s a science to fishing. There’s a reason that markets have positive expected returns, and that time *in* the market is more important (and generally more successful) than *timing* the market. The explanation is as simple as it is profound: compound interest. It takes time for compound interest – the interest on interest on interest – to work its way into our portfolio’s aggregate value. Along the way there will be recessions and panics and bear markets and inflation and government regulations to scare us out of the market. But by owning economic assets – fractions of companies that conduct real businesses and provide a return on equity to their shareholders – we allow the compound interest of their aggregate earnings to accrue to our benefit.

Markets aren’t magic, and it doesn’t make any difference what socks I wear. It isn’t bad luck that’s the enemy. It’s usually our own fear, greed, and lack of planning. Because the fish are always biting. We just need to figure out where.