Have you seen what the market did yesterday? I bet you did. Many on Twitter are lamenting that their 401k are suffering. Even my accounts have taken a big hit. I don’t blame anyone for wondering what is going on. But if you feel like you are about to panic, now is the time to panic about your panic! Take a deep breath and utter the words, “This too shall pass.” You will be fine in the long term. Let me explain.
The worse thing you can do right now is panic and sell while the market has dropped profusely. Note the following example. If you have 1000 shares of a mutual fund that is worth 2 dollars each, you have a $2,000.00 value. Now after these events you still have 1000 shares but now each one is only worth 1 dollar. That is a 50% drop in value. However, you still have 1000 shares. When the market turns around again you still have 1000 shares that grow for you.
However, if you sell at this point, you are taking a loss on the price and reducing the amount of shares you have. When the market turns around you will not have a 1000 shares. This will cause you to take longer to recoup your money. “Don’t panic” is still the word of the day. Ride this out like a thunderous roller coaster. Repeat after me, “This too shall pass.”
Now let's say you are already in retirement. This is now affecting your day to day operation, what now? The same applies. Don’t sell. That would only guarantee a loss. A loss you cannot afford. Also by reducing your number of shares you will guarantee that your funds recuperate at a slower rate when the market turns around.
What I am doing is systematically buying more. Twice a month, regardless of what the market is doing, I buy more shares of my funds. What’s the big benefit of this? I am increasing my base of funds wider. In our example of 1000 funds, if I can buy more and increase my base to 1500 funds, now I am recouping my money fast in two distinct ways. One way is that I lower the overall price at which I invest. The second way is that I widen my base at a cheaper rate. Now is the time to panic about your panicking, and don’t sell!
I know you may be scared, but stay the coarse and repeat after me, “This too shall pass!
If you have questions don’t hesitate to ask here. Take charge of your money!
Your biggest cheerleader on social media,
P.S. Day 297 please pray for the 7.2 million goal for 2020