My Portfolio Dropped 8% – How’d Yours Hold Up?
It’s been nice to see the stock market hold its ground and have some pretty good days lately, but I opened my mail last week to find my quarterly statement that summarized my portfolio. The first thing I noticed was that my investments had almost dropped 8% this past quarter it was hard to stomach. How did you do?
Even though this was to be expected, it does not make it any easier to look at the big red, negative number. But this doesn’t change a thing about my long-term outlook and confidence in the stock market. From the research I did on Buying the Housing Slump, it’s proven that a diversified portfolio generally beats real estate investments and is a reliable strategy to increase your net worth.
Did you know that the stock market has never produced a loss in any given 15 year history? That means that based on historic data there is a 0% chance in losing money when investing in the stock market. What other investment can return an average 10% return without any historical risk.
So while it is not easy to look at my financial statement and subjectively convince myself that it is a good idea to keep investing, I know objectively that this still is a great a time to invest. The market is unpredictable, and it is generally just a few key big performing days that make one’s portfolio profitable in a given year. So for now I am going to continue to take advantage of the short-term volatility and keep investing on the down days in order to be “in” the market when the rebounds occur.
If you are having trouble being “in” the market, remind yourself why you are investing. You know there is short-term risk that allows stocks to be a good investment, you know that over time your portfolio will be profitable over time, and you know that compound interest will make you rich. If you are selling simply because of panic, all you are doing is locking in your losses now.
As Robert Arnott, founder and chairman of Research Affiliates, states:
The way to respond to this kind of market is not to ask yourself, ‘What do I do to make money in the next three months?” but “What would I want my portfolio to look like over the next 30 years?
Take advantage of the opportunity to buy cheap investments while you can. Opportunities like these only happen a few times in a lifetime. This is when the rich become ultra wealthy.
Millionaire Money Habit: Ignore the short-term performance of your portfolio, and remind yourself why you are investing in the stock market. Now more than ever it is important to stick to your investing rules and invest in a properly balanced portfolio. -RT
photo by El Gran Dee