So the Stock markets fell in value over the last week for some reasons, which is always the case.
There are always reasons. This is just a fact. There is a reason for it to go up and a reason for it to go down.
It ebbs and flows. That is just the nature of the beast.
I awoke this morning to have less value in my investments than I had from the previous week.
Ok. That is what happens.
The funny thing is I still had the exact same amount of money that I have invested from the beginning of my journey.
That part didn’t change. I haven’t lost money, my investment value had just declined, but my capital remains very much intact.
It could have gone the other way. Again, the nature of the beast.
So what did I do?
I bought some of the declining stocks and invested a little bit more in my indexed linked funds because that is what you are supposed to do if the market turns down on-trend.
I am no finance guy, and please do NOT take investment advice from me. I am not qualified to give it. I do know me, though.
What I can also tell you, though, is that people always look to buy when the market is UP and then panic when it is DOWN.
They then hold back on their investments, or even worse, they look to sell… and why?
Wait for it.
They will wait to buy because the market is down and want to ‘stay’ to be sure and so WILL BUY WHEN IT IS HEALTHY AGAIN.
Oh. I get it. You don’t want to risk anything.
But, this is the thing you have to get around in your own head. You have to understand that nothing great was ever achieved without someone taking some risk.
You have to accept some risk. (yes, YOU)
It is part of ‘The Game of Life’… it is the nature of the beast.
Managing your risk tolerance is all part of the process. It is all part of the journey to F.I.R.E.
You have to earn money, spend less than you earn. Save money for a rainy day. Avoid ‘bad debt’ (I always say just avoid all debt, period)
Invest for the long term – take the safe and cheap often mix for investing. Protect yourself and your investments. Look to grow your income from different income streams. Invest in some individual stocks, but not a heavy mix. Keep track of your net-worth. Run your budget tightly and plan your exit strategy from the Rat Race…
And within all that. You have to learn to manage your own risk tolerance for money and, for that matter, for everything in life.
‘Most people think that the stock market is a risky investment and so they will avoid it at all cost and avoid all risk. This is just ridiculous thinking. Just crashing in and not having a plan or an investment strategy is a risky plan. That is the risk.’
This fear is media-driven.
The media will preach to you all the bad things in life, and if you don’t take time to avoid the constant full-court press on this, you won’t leave the house. Because it would be too risky.
They want to scare you. Tell you life is all risk – because it helps you stay locked into them, and when you are locked in, they are making money form your eyeballs.
There is obviously risk out there. Risk everywhere. But you need to learn to navigate it.
Learn to manage your own understanding of it and how you react in all the varying circumstances.
This is still very much my own journey. I am forever learning. But I do not panic when I see red on my net-worth balance sheet. My, ‘Me as a Business’, company financial report…
No panic because I trust the process, and I am in it for the long term. So, I debate with my inner voice and tell myself to chill the f*ck out. It will come back in the long-term, and if it doesn’t, then you (meaning me) have made plans.
Investing in your future contains a whole lot of risk. Like life, it has risks.
But the bad things that happen to you in life pass over time. That is the same for any downward trend in the Markets… it will pass; history has told us that.
When the market is trending down, it is an OPPORTUNITY because people will sell in a panic. If you know your own risk tolerance, then you can manage to do the opposite. Buy.
When the Markets are in ‘turbulence’, then people do stupid things with their money. Trying to control it.
Trying to manage the volatility of the market is futile. That is risky.
You have to be stuck in it for the long term.
If you do find that you are risk-averse, then you can mitigate the risk with your investments. You can do this by buying and holding indexed linked tracker funds with low-cost administration fees. They are cheap to own for going the distance.
‘Turbulence’ in the Markets is the friend of the long term investor.
Financial risk can never be eliminated.
It can be packaged up and sold, think insurance, but the financial risk can not be removed from the world.
You either accept your risk as part of the process or take your risk more harmfully and avoid everything in life.
To stop worrying about money, do the following 4 things.
- Build your personal wealth (start with getting out of debt and saving up for your rainy-day fund).
- Invest for the long-term and have a strategy that works for your plan for life.
- Protect yourself from everyday life’s misfortunes by taking the appropriate insurances that support all of the happy outcomes.
- You need to work on yourself and accept that risk is an integral part of finance, investing, and life. Know you, know your limits, know when your bottle will crash.
If you get this, then you will be all good in the long term.
You will survive any market disturbance, and it will be worth the risk you know you took.
Just know, though, you do have to take some risk.
It’s just life.