Well, I’m certainly not enjoying this. Today my portfolio fell another 6%. That means I’m down about 40% for this year so far, nearly twice as bad as the S&P 500. Is that worse than yours?
Hey folks. An update on market conditions, investment status, and general support.
This has been a terrible year for nearly every investor. Speaking for myself, my portfolio is now beaten down to a place I last saw in early April 2020. Two years of research, of analysis, of frugality to make funds available for investment, and of difficult decision making— all wiped out in a few months. This is a brutal experience requiring both grit to stay the course and self-care to soothe the pain.
2022 is why we invest for the long term. It is why we only put money into stocks (or ETFs or bonds or funds) which we can live without for as much as 5 years: sometimes it falls and has to claw its way back. Remember that money in the market is meant to someday pay for your children’s college, or a far-off dream vacation, or seed a second career, or for your retirement.
But I expect that right now you have serious doubts. You’re reconsidering your decision to have ever invested at all. You want to ‘rescue’ your money, to salvage what’s left of your portfolio. I know, because I feel that pull too.
As fearful and frustrated as we are, however, we don’t know what’s coming. We can only suspect, with history as our guide. I suspect that 2022 is the forest fire which clears the deadwood and creates fertile soil for new growth. If you sell now, all that ugly red in your portfolio, which represents lost value, becomes actual realized losses. You take a big hit, but then you’re out and you think you’re safe. But with inflation nearing 9% annually (the worst since the early 1970s!) you obviously can’t just put your cash into savings; if you just piggy-bank your money today you would literally be losing nearly 9% of value every year. So investing is necessary to even try to stay even, never mind build a future.
And what if the market doesn’t continue to fall? What if things level out next week, if we begin a long slow climb back? If you’ve sold your stocks, when will you feel confident enough to buy back in? How much of that eventual market rise will you miss because you’re on the sidelines waiting to be certain?
Timing the market is throwing darts at a moving target. You better have perfect aim because you’ll have to be right twice: Right about when to sell, and right a second time about when to buy back in.
Instead, reassess your holdings: remember that the stock price is merely a momentary measure of the resale value of one share of a company. Is there something fundamentally wrong with that business? Are sales falling? Is your business being outmaneuvered by a competitor? Losing executives left and right? In legal or regulatory trouble? Making seemingly bad strategic decisions? Or is it just that the value has dropped for no clear reason specific to the company?
Staying put requires serious fortitude, no question. But do you know what’s even harder? Being greedy when others are fearful: recognizing that if the stock is down, it might represent a tremendous value looking forward. Deciding to buy deeper into the company at a time like this— now that’s hard. What would a truly great investor do?