I’M FREAKING OUT!

Hi Scott,

I’m sitting here watching my portfolio plummet. The stock market is down 4.75%, and my portfolio is down 5%. IN ONE DAY. I have only been investing for a couple of years and I am freaking out. What should I do?

Louise

Hi Louise

I feel your pain.

Now, as Warren Buffett would say … actually bugger that! All the Mr B quotes in the world can’t prepare you for your first drop in the market.

Here’s how I deal with it.

First, I don’t invest any money in the share market that I think I’ll need in the next five years.

Yes, the interest rate I’m getting sucks, but not as much as seeing the money I need evaporate in a sell off, right when I need to spend it. If you put short-term money in stocks or (god help you) crypto, you really need some time in the contemplation corner.

Second, I have come to think of my share portfolio like my farm. It’s there to provide me with a golden harvest of dividends over my lifetime. Some years there will be bumper crops, other times there will be droughts. That’s just how the world works. Yet over the long term, owning the farm makes sense (especially when I don’t have to drive a tractor to get the income!).

Finally, how do I react to savage sell offs like we had last Monday?

Well, I don’t. I feel the same way about shares falling as I do reading a newspaper headline that says ‘farm prices are down 5%’. Sure, it’s a bummer, but what can I do about it?

Call up a real estate agent and sell?

They’d be very happy to claim the commission, but would I be any better off?

Of course not!

I’m now invested in broad based, low cost index funds, and my golden rule is this: ‘never sell the farm’.

And so if I never plan on selling, what do I care about the price?

Scott.