Remain Invested with Your Portfolio
Stay Invested! It’s been a rough couple of weeks for markets and your portfolios. There’s a lot of stress and frustration and I’ve received a lot of inquiries from clients, friends, and family.
“How much higher will interest rates go?”
“What are the chances the economy slips into a recession?”
“This is agonizing! What should I do?”
It’s incredibly hard to look at your portfolios and see the value decline as time goes on. Your hard-earned money that you’ve invested for years is not worth as much. It hurts. I feel your pain. I hear your concerns. Many of you want to know what to do.
Market Timing Does Not Work
The best thing to do is to stay invested. Yes, that’s correct. It’s hard advice to take, but the correct answer is to keep your money invested. Some of you may want to sell your positions, hold cash, wait for the market to go lower, and buy at the bottom. You think this strategy will prevent you from losing more money. It’s a very tempting idea, but it will cause more pain.
How will you know when markets reach their absolute bottom? How will you know the proper time to reinvest? If you think you can reinvest at the market bottom, how accurate were you in selling out of your investments at the top of the market? For example, the S&P 500 reached its highest point of 4,818 on January 4, 2022 and is down 23% as of Friday. Did you sell out on January 4th at the top of the market and avoid the 23% loss? No one can properly execute this strategy because it’s impossible to accomplish. Stay invested so when the market does increase, you don’t miss it!
There are many emotions and ideas that come to mind because there is so much pain with losing money. The best strategy, and also the hardest strategy right now, is to keep your money invested. Keep in mind that the stay invested strategy is for money that you have previously invested.
New Money Strategy
If you have some extra cash lying around, now is the time to invest it in the market. Please note, this is a different tactic than the stay invested strategy. The stay invested strategy is for money previously invested and the new money strategy is for money that you have lying around.
Markets are down 23% and you can buy wonderful investments that are on sale for a large discount. Over the long term you will increase your portfolio value with this strategy. For example, suppose you like eating pizza that costs $10 a pie. One day, your favorite pie costs $7 and suddenly, you get a lot more pizza for your money. The same idea applies to investing.
If you’d like to eat some pizza and chat about your agony concerning investments, markets, or anything else, please reach out to me.