When the market heads south, don't just do something...
There will never be a time in investing when you’ll be able to sit back and relax because there’s no more bad news in the world, or in the economy, or even in your local city.
There will always be something.
Something you can’t anticipate. Something you can’t time. Corona anyone? That’s why we don’t even try to time the market. It’s time in the market. Not timing the market.
Self-test on whether you can be a stock/stock mutual fund investor. Can you withstand a 15% drop in the value of your portfolio at least once a year? Can you withstand a 30% or thereabouts drop about once every five years?
You held on during the Corona Crash, didn’t you? I would say you can then.
So what if we’ve had a couple down months named January and February.
Here’s four things to fight off the feeling that you should do something.
First. Never forget you’re an investor, not a trader of a speculator. You don’t try to time the market. You spend time in the market.
Second. There will always be a crisis du jour. We don’t make changes to an investment based on the crisis du jour.
Third. There is no degree of crisis du jour. One crisis is no more detrimental than another. Some may appear bigger and badder. But it is still a crisis du jour. We have no way to know how the market will respond ahead of a crisis du jour. Seemingly good news is often bad for the market and otherwise bad news is often a boost for the market.
Fourth: Mainstream media will either supersize a crisis du jour or settle for the small combo with fires depending on the chosen narrative. You may not even see it on the menu. Hence the truckers getting trampled by Trudeau in Canada, yet nary a word from mainstream media, eh?
You didn’t flinch during the Corona Crash of 2020 when the market fell 30%. You likely don’t even remember that, do you. Well good, you shouldn’t. It doesn’t matter now. You hung in there.
And you shouldn’t do anything now. Unless of course you’d like to buy some items while they’re on sale. Because that’s what investors do. And you’re an investor. Not a trader or a speculator.