Managing Stomach Churning Market Drops


Ugh.  This year has been psychologically brutal for buy and hold investors.  Between February’s sell off and this week’s repeat on US/China trade war concerns-there has been a lot of volatility in the market.  The S&P 500 is currently down below November 2017 levels wiping out all January 2018 gains. Don’t panic-remember we are investing for the long term. 


S&P 500 March 2018 YTD

At least, for now, we are still positive versus this time last year.


S&P 500 1 Year Performance March 2018

 
None of this short term volatility matters-even if the US heads into a recession (after all this is the second longest bull market in history-it’s time) in the next few years. These market dips are a buying opportunity.  Basically the market periodically goes sale.  If the S&P is at 5000 in seven years-would you rather have bought at 2500 or 2800?  Remember-we are investing for the long term, 20-30 years.  The market goes up over long periods of time.  Look at the S&P 500’s stellar performance since 1987.
S&P 500 Performance since 1987



How am I managing seeing my savings fall thousands of dollars in a single day?  I look less frequently at my portfolio, tell myself that I’m investing for the long term, buy stocks on the cheap when I have the cash, and never sell on adverse market news.  I’m sticking to my plan-investing in my set allocation of well diversified stock and bond index funds every pay check as normal.  And revel on dividend distribution days (see my post on dividend reinvestment to maximize returns) because I’m buying more shares at lower prices.

I’ll admit it is disheartening continually putting money into the market just to see my account balance drop the very next day.  But I will stay strong knowing I’m investing for my future.  I hope you will too.


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