Many new investors out there aren’t sure how to handle the recent drop in the markets. Since October 12, the DOW has been down 6.27% as of the writing of this post. The S&P 500 has been down 5.69% over the same time span. If you’re new to investing and haven’t experienced a drop yet, you might be panicking because your small account has constantly been losing money over the past 2 weeks.
I’m here to tell you to not panic!
Think of the markets as a roller coaster. There will be ups and downs, twists and turns. It’s up to you to stay disciplined and to not panic. If you consider the market as a literal market, you want to buy items that are on sale right? That’s the way I think about dips in the market. All of my favorite items are on sale! It’s not like one or two of my investments are down because they’re bad investments, the entire market is down so I have nothing to worry about. If anything, I think of it as an opportunity.
I’m 27 and still have decades of investing to do before I officially retire. So averaging down for my portfolio is great for me. For those who are close to retirement, this might not be the case. But for most of you new investors out there, this is an opportunity. The market as a whole is consistently upward trending.
If you take a look at the chart above, you’ll see that throughout the span of 90 years, there is an upward trend. The Great Recession was an awful event that devastated millions of families, but if you look at the market, the economy recovered and skyrocketed even higher than it was before.
If you stayed in the market and bought at the low in 2009, for the past 12 years, your wealth would have grown by 338%! I’m not saying that this is what is currently happening, I mean it might because of the pandemic, but it might not.
The moral of the story is that you don’t want to get off the roller coaster while it’s going because that’s when you get hurt. Investing in the market regardless of if it’s down or not is something that seasoned investors do. While you can’t time the market, you can utilize dollar cost averaging at any time.
I hope after reading the post, you settle down and make a decision not out of panic, but out of careful consideration. You will experience downturns in the market and if you’ve been in it for any considerable length of time, you’ll definitely feel market slides. Although it might be tough to stay in and not panic, getting out at the bottom is the worst thing you can do for your finances.
I’ll end on that note for this post and I hope you enjoyed reading about the stock market dips that we are currently experiencing. Thank you so much for reading and I’ll catch you on the next one!
Marcus