You don’t need me to tell you what an absolutely awful feeling it is to lose your money in the market. It can make you feel pretty helpless, frustrated and all the rest of it. At the heart of it, money can be an emotional thing for many of us. Whether we like it or not! And since all that money was once our hard work (aka slogging at your 9-to-5) it’s no wonder we feel so miserable when we see our investment account – which is basically the money for our future abode – crumble right before our eyes.
The trick about investing is to not let our emotions get in the way of our decisions. But boy is this easier said than done. Buy low, sell high you’ll tell me, right? Yet when markets fall do you rush to snap up stuff (like a sale at your fave store) or do you watch in fear, as your holdings plummet in value. Or maybe you sell and run for the hills because you’re just too afraid for what’s to come. Buying when everyone else is and selling when everyone else does is one sure way to lose money. Buying when there’s fear on the street (like there is right now) can seriously pay off. To quote Buffett: “Be greedy when others are fearful and be fearful when others are greedy.” These past 2 years have shown us the full spectrum of this all-timer quote!
When markets have fallen so much, that’s usually when it looks like a pretty good time to buy. It means that investors (and markets) are super pessimistic and see the future as pretty grim. So why would you wanna own assets in that kind of environment? Because markets recover! They always do. It’s a matter of when not if. And markets move way quicker than economies, remember that.
But buying when things have seriously tanked is very, very hard. Of course we’ll never know the bottom, you’ve just gotta buy when it makes sense to you but that’s not where the difficulty lies. That lies in the fact that market downturns can be pretty paralysing. I stared at my investment account and felt a little numb. For complete honesty and disclosure (and to make you all feel a little better), my portfolio is down by 14.7% since I started investing in November 2020. Brilliant, huh.
So where do we go from here?!
Here are 3 tips that have helped me during what feels like a never-ending downturn and I hope they can help you too by giving you some perspective and peace of mind, which we could all do with right now.
#1 Dollar-cost average = your (money) bestie
If you feel too scared to invest, just keep on dollar-cost averaging. By adding a fixed amount to the markets each month, you don’t need to think about where the markets are at, only where your money’s at! This seriously reduces the anxiety that we face when choosing whether we want to invest. Or not. My guess is that most of us can feel too scared to invest when markets go down. But if history’s anything to go by, that usually presents the best time to do so since the upside is far greater. Since the bad news is already (mostly) priced in.
So if you can’t bring yourself to add more to your investment accounts during times of turmoil at least stick to your plan of regular, monthly investing. This way you don’t need to worry about market timing or any of that stuff. You just do your thing and let markets do theirs.
If you feel brave enough, I would suggest adding more dosh to your accounts when markets really tank (read here for a detailed view on how to do that) that way you get to take advantage of ‘the dips’ but you’re not consumed by market-timing. Easier said than done, trust me. Though it will hopefully pay off. One day!
And if the market (more like share prices) are making you feel sick, try not to look at your investment account. What you don’t know can’t hurt you. It also might help you by not having your investment app on your phone and being a (relatively!) old-fashioned and log-in via your PC. It’s certainly helped me stay sane and not be too short-termist despite having Bloomberg on in the office 24/7. Yeah, shouting Jim is still there. If he can keep his job, I bet anyone can!
As we Brits would say, Keep Calm and DCA On!
#2 Now’s the time to think of your older oldie selves
Pensions. Ah. We’ve got ages haven’t we? We’re so young, right?! Ha, well the younger we are, the more time our pension pots will have to grow and really swell in size. I bet you’re all enrolled in a company pension of sorts that allocate a certain % of your salary to your pension.
My company has set this at 8% as a minimum but this year I’ve decided to up that to 15% so that my pension can enjoy lower share prices! I’ll lower it come next year but it made sense for me to up it this year as I am lucky enough to be living at home so can afford it.
If your finances allow you, you might want to think about topping up your pension a little more this year. Think about it, it’ll have a few decades to work out this mess! And by the time you retire, imagine what the extra cash would’ve grown to. Loads, I hope!
#3 Let’s get talking!
As Gen Zers, this market downturn can feel pretty jarring, in large part because we’ve never experienced anything (or any one, really) like it. Most of us started investing these past few years (apart from my friend who started at 12!) and we’ve not come head-to-head with a bear market. Until now.
But it’s here and it’s ripping through everything. Even bonds that are dubbed ‘safe stuff’ have already fallen by more than 13% this year. The only ‘comparable’ fall was by 2.9% and that was back in 1994. So you see how unique this year is!
When markets take a turn for the worse and we’re grappling some pretty new conditions, it can help to talk to people. Talking to your friends and colleagues who are all in the same boat can be really comforting. You’ll notice how many of you feel the same way and experience the same challenges. Suddenly it feels a little less isolating.
I would also say talk to older people! Talk to people who have lived through many bear markets and ask them how their kept their cool. Pick their brains! I bet they’ll be more than happy to share some secrets they’ve picked up on the way.
Remember, it’s only really a loss when you click sell and my guess is that that’s not for a while. Your portfolio will have hopefully recovered by then.
This is not the first crash markets have gone through and it won’t be the last!
Zoom out and remind yourself how long you’re investing for. Over the long-term, markets recover.
Have a little faith!
Disclaimer: This blog is not investment or financial advice. It is my opinion only. This blog is not a personal recommendation to buy/sell any security, or to adopt any such investment strategy. Always do your own research before you commit to any investment.
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