All of this has happened before, and all of this will happen again.
As I write this, the US markets have just closed down about 2.5% for the day, and about 9% down for the year so far. Though I have written on this topic before, it bears reiterating: Our successes or failures are born in times of adversity. Your future wealth is contingent on your ability to stay the course despite terrifying media proclamations that somehow, someway, this correction is worse than any of the countless corrections that have come before.
If you are pursuing a diversified (and hopefully passive) portfolio, the very best thing you can do right now is just stand there and get rich with patience. I’m not alone in that advice, either. Tim Buckley from Vanguard and Jack Bogle agree, too.
Tim says it best:
Second, some patience. This is the challenging part of investing. It’s tough to sit tight and stay calm when we live in a world of 24-hour news cycles amplified through social media and smartphone alerts. “Tuning out the noise” is difficult when the noise is seemingly everywhere.
No one can predict what’s next for global markets. That’s why today’s chatter about what the market is doing or might do is meaningless, and potentially dangerous, for the long-term investor.
The key words here are long-term investor. You did not “lose” money today any more than you “made” money the last time the market went up. Your investments, an abstract collection of assets, have a higher or lower value, if sold, on any given day. You have not made or lost money until you sell. Those of us pursuing FIRE should not concern ourselves with the micro-behaviors of the market, to include how the market performs across months and single years, because the only time period that matters to us is the lifetime.
Look, I get it. We’re all watching our portfolios get beaten up. For the third month in a row, I’ll be tallying up an investment total that almost-but-not-quite hits $100,000, despite having continued to buy regularly. The 24/7 financial news cycle is a dizzying mix of contradictory advice, and it’s impossible to know how to act.
The truth is, despite what the news would tell you, this correction, as far as the passive, long term investor is concerned, is no different from the last one. The magnitude and duration may change somewhat, but eventually, things always get better, and those who kept their cool throughout are always better for it. It wasn’t even all that long ago that we were experiencing the financial crisis of 2008-9. Who did the best through that period? Those who had the courage to double down, invest more, and stay engaged.
You have to ask yourself: Are you the type of person who just says “buy low, sell high,” or are you the kind of person who does it? When the market moves downward, if you sell, then by default, you are the kind of person who buys high and sells low. Don’t be that guy.
You are the captain of your own ship, and you must keep your eyes firmly fixed on your goal. The market. Will. Go. Up.
Timely article. Looked at our portfolio this morning and was a bit disheartened. Glad to be reminded that we are not alone and that the strategy is to stay the course! Patience it is. =)
Great post. I agree that if you’re a long term investor you should not be concerned with all the noise out there. When your investment are properly diversified according to your goals, who cares about what he market does in a single day or even year?
I totally agree (of course!)! I really think resistance to noise is one of the defining characteristics to surviving a 30+ year retirement.