The market had a rough day today, to say the least. At one point, the Dow was down more than 1,000 points and ended up down 588 points, or 3.6%. Personally, I checked our account balances and we are down over $10,000 in the past few days. It’s important to remember though that we haven’t lost anything because we haven’t sold anything. I’ve recently reflected back to 2008 when we last saw these types of declines. I didn’t sell back then, but remember my investment accounts getting cut in half from ~$25k to ~12k. Now that I have a considerable amount more invested I have been reflecting on how to make sure I keep the same discipline given that the dollar amount represented by the same percentage movement would be >10x what we experienced in 2008. In the back of my mind, I always know that a 6-figure loss is possible, but the dollar amount makes it feel like a lot more than saying “25%”. The best answer I have for myself at this point is to remember that I am working with a long time horizon, that it is impossible to time the market, and that I shouldn’t even try.
I used to tell clients that they should have the most aggressive portfolio that they were comfortable sticking with through all the ups and downs. Even if it is in an investors best interest long-term to be heavily invested in stocks, I knew that if they didn’t have the fortitude to stick with the strategy they may actually be better off avoiding stocks. No matter what portion of your portfolio you have targeted to be invested in stocks, the recent selloff is likely an opportunity to rebalance and buy more. I didn’t get the chance to buy more stocks today, but plan to do so shortly.
I have previously documented my intentions of allocating more of our assets to stocks, so any buying I do was already planned before recent large market movements. The most important thing to remember in this type of market is to make sure any transactions you make are not based in fear. As a co-worker used to always say: “Be careful out there”. Don’t be like far too many other people who make the mistake of selling stock positions AFTER big losses.