The shortest day of
The year is a reminder:
Time is an asset

Whenever the Winter Solstice comes around, it feels like the end of a story. The late morning and early sunset make the day feel like it’s flying by. It can seem like there’s never enough time to get everything done. It feels like the cosmos is saying “pencils down, time’s up.”

When something is scarce, it tends to demand more of our attention. If you need to pay more attention to time, having the sun rise while you’re driving to work and set in the middle of the afternoon is a pretty good mechanism to do so.

The time value of money is one of the first things that gets covered in most any financial literacy course. The sooner a person starts the process of earning compounding returns, the greater the probability that the investor reaches the steep part of the compounding curve. Add onto this the impacts of inflation, and you get the axiom “a dollar today is worth more than a dollar tomorrow.”

Morgan Housel, author of “The Psychology of Money”, uses Warren Buffet to demonstrate this point.

As of September 8, 2020, Buffet was 90 years old. By that time, he was worth over $81 billion. However, about $70 billion of that came after his mid-60s. He started investing at 10 years old, but he didn’t reach the dramatically steep part of the compounding curve for over 5 decades.

This can be looked at as a positive or negative.

Bad news first:

Every day a person spends doing something they know isn’t making progress towards a goal, financial or otherwise, is time they can never use again. Failing to start a debt management plan, or saving for a vacation, or maxing out available retirement plan contributions, or implementing an investment plan, pushes the steep part of the growth curve farther away.

To make up for lost time, some people resort to riskier behavior in the hopes that by latching onto things like cryptocurrency and meme stocks they can get outsized returns that make up for missed opportunities. The problem is that these strategies entail more risk. Risks can come in the form of risk of loss, losing the liquidity of funds, paying high fees, or all of the above.

Feeling the onset of age and too many years at desk jobs, I’ve gotten skilled over the years at overdoing it in the gym. I try to make progress too quickly, and eventually my body breaks down and I need time off to heal. Those lost days while I wait to be healthy again get added to the years I already missed by waiting to start. I’ve learned the hard (and painful) way that slow and steady means more days making progress.

The “make up for lost time” mindset is the behavioral default setting that panics when it falls behind. Panic leads to error, and can lead to a cascading spiral of impulsive decisions and mistakes that push our goals farther away.

Rather than having this backwards-facing view of time, the option always exists to look forward instead.

Having a forward-facing posture towards time turns it into an asset: something you always have and can use right now to your benefit.

The “make up for lost time,” backwards-looking posture treats time as a liability: something that has been lost and must be repaid with interest. The risks you take for make up for lost time are the interest charge on this time debt.

I believe the forward-facing posture is the healthier option. It takes advantage of the most important part of the compounding curve, which is not the steep part. Just like a roller coaster, the steep part is the fun part, but not the most important.

The most important part of the curve is where it starts. No one gets to the steep part of the compounding curve without first taking one step in its direction. You can’t get to the steep parts of the roller coaster without waiting in a boring line first.

The Winter Solstice may prompt feelings of regret and loss. The day is short, the night is long, the weather is cold. There is plenty of time to sit and ruminate on the “could haves” and “should haves” from the past year and beyond.

At the same time, the Solstice represents the start of a new journey. Every day for the next 6 months, the sun will creep a bit higher in the sky and we will have more daylight. Just like the early stages of a compounding curve, most people won’t notice the extra minutes of sun each day as they add up.

The angle of the sun relative to the earth’s axis of rotation changes 47° from one solstice to the next. Over a 365 day year, that means the angle changes less than .13° per day, or .27%. If the relative angle of the sun were an investment account, this would be an intolerably low rate of return. Yet in only six months this steady progress turns winter into Spring, and Spring into Summer.

New opportunities will emerge. What looked like a mistake yesterday may turn out to be an advantage today. There will be the chance to take one step towards a curve you want to grow towards.

All of us at SeaCure Advisors wish you and yours a restful, reflective holiday, and that 2023 is full of footsteps towards the things in life you value the most.