Let’s summarize the month: the quickest correction since the great depression.
How do you feel about it?
Let me tell you about myself.
I feel exactly the same as during the bull run.
Indifferent.
Seeing green and red numbers changing day after day while I have absolutely no intention of converting them into cash in the near future.
I won’t speculate about what’s going to happen, but I’ll say that I’m handling it pretty well. And you should too.
Especially if you are invested for the long-term and holding a diversified portfolio, preferably market cap weighted, you have absolutely nothing to worry about.
If you need more comforting, remember that what happens with the DOW, the S&P, or any other index affecting your current net-worth, has very little to do with your cash-flows. I hope you’re not exiting the position in the very near future anyway.
Remember, there is way more money to be put into the market. There are more opportunities to be grabbed. Short-term volatility is nothing!
Of course, being a crypto investor and not being involved in a significant correction for the first time plays a role… But not that big of a role – even in the first stock market correction I was part of (and everyone was screaming “recession” back then), I watched my portfolio go deep in the red and climb back up the next year.
I don’t know who said it first, but there’s a quote popular in real estate: “you make money when you buy, not when you sell“.
It’s applicable to diversified long-term stock portfolios as well.
Anyway, if you read my January update, you know that I capitalized on some profits during my rebalancing. A correction was coming our way announced by the ATH we got day after day and I’m happy I acted on it. But that’s not the only characteristic of an active investor I’m showing. Although I live by “time in the market beats timing the market“, I still keep a portion of my wealth in cash. In other words, I implicitly time the market by holding cash waiting to be invested after an inevitable crash. I think that time is nearing, but will wait for it to be official before I go all in.
But remember, maintaining a boring, passive, long-term portfolio is the way to go. I do that with most of my net-worth too – DCAing in the same ETFs, with the same amount, on the same day, every month.
For optimal results and no risks of human weaknesses interfering with your wealth, just keep it passive.
If it’s not boring, you’re doing it wrong.
Leave emotions out of this – and I’m talking both about being happy (or greedy) when it rises and sad (or fearful) when it crashes. The actual risky thing that can happen is not losing money, but a bad economy forcing you to lose your only source of income. It’s still not a “blood on the streets” scenario, but be forward looking and anticipate this problem accordingly instead of worrying about the stock market.
Investing quotes
Since I already mentioned “you make money when you buy, not when you sell”, “time in the market beats timing the market”, and “if it’s not boring you’re doing it wrong”, let me leave you with a few more quotes from famous authors and investors to help you cope and focus on the long-term.
Enjoy!
- In investing, what is comfortable is rarely profitable
- Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years
- Price is what you pay, value is what you get
- The stock market is designed to transfer money from the active to the patient
- Someone is sitting in the shade today because someone planted a tree a long time ago
- Diversification is protection against ignorance
- If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks
- Be fearful when others are greedy. Be greedy when others are fearful
- Risk comes from not knowing what you’re doing
- Absent a lot of surprises, stocks are relatively predictable over twenty years. As to whether they’re going to be higher or lower in two to three years, you might as well flip a coin to decide
- Know what you own, and know why you own it
- Sometimes buying early on the way down looks like being wrong, but it isn’t
- The investor’s chief problem – and even his worst enemy – is likely to be himself
- The individual investor should act consistently as an investor and not as a speculator
- The four most dangerous words in investing are: ‘this time it’s different’
- History doesn’t repeat itself, but it often rhymes
- You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets
- Minimizing downside risk while maximizing the upside is a powerful concept
- The entrance strategy is actually more important than the exit strategy
- Invest for the long-term
- You don’t need extraordinary intelligence to succeed as an investor
- Anyone who is not investing now is missing a tremendous opportunity
- The price at which you bought a share was not important. How long you held it was what mattered
- Cash combined with courage in a time of crisis is priceless
- If you are not willing to own a stock for 10 years, do not even think about owning it for 10 minutes
- If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring
- When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever
How many are applicable to your investing strategy?
