“The time to buy is when there's blood on the streets.”
I find the biggest difficulty in investing is the discipline to manage your emotions. This post is for those who feel the same way.
Right now, everything is down (except oil). Even the people who started DCAing index funds recently — allegedly the safest way to invest — have lost money. The natural instinct is “damn all of this, I cut my losses and I'm outta this madhouse”. The problem is: That's the worst thing to do.
Stopping to invest/DCA in times of trouble is a great mistake. Now is a far better time to put money in the market than was a year ago. It's unfortunately also much harder, emotionally. Because one not only has to fight the own feeling of fear and uncertainty, but also the one-thousand bears that crawl out of their caves, prod their chest and tell how everything is gonna get worse.
The problem of reddit is that it's an amplification of market sentiment and yesterday's losses. It's a manic-depressed Mr. Market telling you how the world is going to end tomorrow. That makes it even harder to feel good putting more money into something that has already created a loss. But I am absolutely convinced that the long term winners of this game are those that make the right decision to keep on investing today and in the months to come. There's a reason Warren Buffet sold last year, but is spending his cash now. Because whatever anybody bought last year, they can get cheaper now. So don't let Mr. Market be your master, but make him your servant.
I don't know how the market will be tomorrow, in a month, or a year. Perhaps things get worse before they get better (which is why I invest my spare cash over time, rather than everything next Monday). But I am sure, that, down the line, things are gonna be fine.
I am not advocating to hold onto bad businesses based on hopium. But good stocks of a solid business won't go bankrupt. AAP, JNJ and TGT will still live tomorrow to take consumer money. Broad index funds will still represent strong businesses. So my advice to all who are new to this game and sad now: Don't let your own fear or current craziness deter you from long term investing. Stick with it and reap the rewards in years to come.
Leave a Reply