What to do When Investments Go Down
THIS may very well be the shortest answer you’ll ever read to the following question: What should I do when my investments plunge into the red?
Are you ready, wait for it… One word: NOTHING.
That’s right, do nothing.
If you are investing for the long term, stockmarkets falling shouldn’t bother you in the slightest.
And if they do, I suggest you stop looking at your portfolio every day, stop watching the business news on TV, and instead focus on doing something fun.
Forget you even have investments.
Why? Because unless you need the money right now, this very minute, it doesn’t matter a damn what the stockmarket is doing today, tomorrow, this month, or even this year.
Just keep on making your regular purchases and go for a stroll in the park. Everything will be fine.
Speaking of which, I once read a really good analogy that I’d love to share with you.
A ruff guide to investing
Imagine you’re in a park watching a man walking his dog. The dog runs backwards and forwards chasing everything in sight. Sometimes it runs far behind the man, sometimes in front of him. But no matter which direction the dog is running, the man keeps on walking, making progress on his journey.
Now pretend the man is the stockmarket over the long term, and the excited dog is the daily movements of the market. Don’t watch the dog, because you never know where it’s going to run to next. Keep your eyes on the man, he is taking a steady route onwards to his destination.
All part of the journey
Stocks and shares around the world have been going up since 2008. Suddenly, in August 2015 they dropped by about 10%. Rookie investors were losing their minds and the internet was full of panic.
I saw a chunk of cash wiped out of my portfolio (“How much?” I hear you ask. Well, enough to buy a new car. Not that I’d every buy a new car, you understand, but you get my drift).
Did I immediately sell my investments and hide the cash under my mattress, while cursing the evil stockmarket?
Nah. I just logged on to my brokerage account and upped the amount of my regular monthly investment.
Yes, you read that correctly, I said UPPED.
I increased the amount I was investing by about 150%.
You see, I love a sale. If I was happy to buy stocks and shares the month before, you’d better believe I was ecstatic to buy them at a 10% discount. So I piled in.
I didn’t borrow the money, take out a loan, or sell a kidney (that would make me a foolish gambler). I also didn’t dip into my emergency fund (another no-no). Instead, I happened to have a little extra cash so I decided to deploy it for my future.
And when (not if) the stockmarket goes down again, and people start to panic, I’ll do exactly the same thing.
Because the dog might not know where it’s going, but the man does… and so do I.
What will you do the next time the stockmarket goes down? Will you sell, carry on as normal, or buy more? I’d love to hear what you think in the comments below. If you found this article helpful, please share it using the Twitter icon.