Yesterday, I posted about the basics of investing. In this post, one of the things I mentioned was:
“…you are also guaranteed to lose money at some point when you’re investing.”
Ironically, yesterday the Dow Jones (which is a stock market index) saw one of it’s biggest drops since the 2008 financial crisis. Of course the press was all over this one.
However, as someone who’s not currently in retirement and is still very much in the accumulation phase this “plunge” doesn’t mean as much to me. It’s actually more like stocks are on sale now. These ups and downs of the stock market are much like a roller coaster.
The Big Picture
I was actually curious how this affected my portfolio and while our investment portfolio did take a hit. I was surprised by the fact that if you looked at the big picture it wasn’t that bad. The best way I can explain this is by looking at one of my holdings in my Roth IRA.
Here’s a screenshot of my cost basis for one of my favorite ETFs, Vanguard Total Stock Market (VTI):
As you can see, over the past four months I’ve purchased roughly 8 shares of VTI at various costs. There’s also 0.13 shares, which were reinvested dividends. Now the second to the last column shows the current market value as of 6:30pm on 2/5/18. The final column is basically the calculation, which takes the current market value minus my cost.
Sure, one of my positions that I purchased on 1/25/18 is currently losing some money, but you have to look at the long-term/big picture with investing. The market may have took a “big plunge” yesterday, but it really only dove back to where the market was just a couple months ago (December 2017). Hey, if you only looked at your portfolio once a year, you probably wouldn’t know any different.
Take a Step Back
For me, I plan on continuing to invest like I always do. I’m not sure whether the market will keep dropping or rise back up. It’s impossible to know what direction it will head tomorrow. The one thing I do know is that over the long-term my portfolio will continue to grow and earn additional income for me.
This is why it’s important to always take a step back. If you just look at the drop your portfolio might experience in one day, you may be tempted to pull out of the market. That would be a mistake though. Don’t try to time the market because 8 times out of 10 you’ll probably be wrong. You have to do your best to take emotions out of investing. Instead, look at the big picture and just enjoy the roller coaster ride.
Disclaimer: I try to provide accurate information on personal finance and investing, but it may not apply directly to your individual situation. I am not a financial advisor. Therefore, I recommend you consult with a financial professional before making any serious financial decisions.