Staying the Course Despite What Seems Obvious

[bullsdoc]

Hey all,

Really enjoy this forum and the site, WCI a hero of mine. Still in residency and investing whatever I can, usually this means filling out an rIRA and part of a 403b (Always getting the match of course).

The past few months though I’ve had a really tough time keeping this up as the markets drop. Has seemed to obvious to me that it’s going to drop then I say to myself “Don’t try to time the market,” and I invest and as I would and then it drops! Hard to stay away from getting frustrated with this, really this is the first time I’ve started losing money in my investments. Any advice for staying the course? Any reason to stay out of the market with all this volility (I know I will be reprimanded for saying this). Thanks for the help

[octopus85]

You're investing for 30 years from now, not for tomorrow. Looking at day-to-day volatility is just looking at noise.

[Hatton]

Stay the course.  Your 60 year old self will thank you for the Roth funds one day. It is hard to do but I advise you to quit looking at your account right now.  Quite a few posters have never seen the market go down.  It is normal.  Every time you buy shares you are getting more shares for your money.  Maybe thinking of that in a different way will help

[ENT Doc]

Like Bernstein points out in 4 Pillars, that log chart is a distortion of reality and doesn’t actually show volatility well. Significant market moves are not even seen, like 1987. The point is to recognize that if you want to be in stocks be ready for a wild ride. As they say, if you can’t stand the heat...

[octopus85]

Also worth considering: if you don't like what you're doing, now, what are the other options?

Trying to time the market is foolish - if you can do it successfully, well, go make billions of dollars doing that. But no one can do it successfully over the long term. It's betting against the house.

[wonka31]

Well, the other options are real estate (also can be volatile), cryptocurrency (very volatile), or some bomb shelter like Crixus stuff (precious metals, etc).

If you don’t like the volatility, stashing in a bank account is possible, but you will be eaten away over time by inflation. Maybe you should have a more conservative portfolio/higher bond percentage to protect yourself from you. There’s absolutely nothing wrong with that and this is a very personal decision. When **** really hits the fan, I’d be worried about selling at the bottom based upon your initial post. A higher bond allocation may soften the blow and may prevent you from doing this. Right now, luckily, you probably don’t have a huge portfolio given you’re a resident and it’s a great time to learn about your risk tolerance

Best of luck.

[G]

I clicked this thread to see "what seems obvious."

Nobody is going to reprimand you except for yourself in 20 years.  (Unless this time is different.)

It is painful having a portfolio down 6 digits (for now), but so it goes....

[MaxPower]

All part of the stock investing game.

My investment career started in the summer of 2008 when I took $10,000 from the proceeds of our medical school condo sale and funded Roth IRA accounts for me and my wife. I then watched over the next few months as the account values went from $5,000 to under $3,500. Even though watching 30% of the very little money I had “vanish” in a short period of time was tough, I knew that I was investing for the long haul, so I kept putting money in. I also funded my only child’s (at the time) 529 account in spring of the following year. Our Roth accounts are now valued at over $100,000 (we have contributed every year since), and my oldest daughter’s 529 account balance is made up more of growth than contributed funds.

Several weeks ago when the markets went down some, the portfolio aggregator on Vanguard showed that our accounts (my 403b and 457 accounts plus our vanguard taxable and Roth accounts) had gone down by enough, as I told my wife, that we could have bought her a new car in cash with the money we “lost.” Since I never sold in either occasion we obviously didn’t lose any money.

As others have said, just keep investing and remember you’re in it for the long haul. One thing that helped me was to not check my balances. If I didn’t know about it, that made things easier.

[bullsdoc]

These are all really helpful comments honestly, thank you. Tough to look at the market having invested at the beginning of the week and think “Well I wanted to wait and I didn’t and now that’s X dollars I could have had if only waiting” but I definitely believe in what you’re all saying and will keep it up. Thanks again

[pulmdoc]

My #1 tip is to automate the investment, then don't look at it. The human brain is hardwired to regret loss and avoid it, even if the loss is unrealized. This leads to selling at the bottom and locking in losses. If I didn't read these forums, I wouldn't have even known there was a downturn. My monthly automatic investment went on like it always does. I don't need the money I'm investing tomorrow, so I don't fret about it today.

If you are unable to tolerate volatility, then a lower % of your investments should be in volatile investments. Of course, this has a cost in potentially lower return. The better course of action is to learn how to tolerate volatility better.

[jfoxcpacfp]

The only time a long-term investor should not be thrilled at market drops is when said investor is ready to start cashing out. It's hard to understand that at your age, but 10, 15, 20 years from now, you'll look back and realize that you'll never see these prices again.

Friday, the S&P 500 closed at 2633.08. It may help to give you perspective if you'll review the post-WWII bear market history on this chart.

[CFEonline]

I too am a relatively new investor. I try to keep a mindset that this is a good thing, I "want" the market to crash (not really because of the implications for other family members etc) but for selfish reasons, I can get great deals now that will grow for decades. The part that is a bit of a struggle as you mention is buying, then seeing it go down more, and thinking wouldn't it have been nice to buy at this price instead. Two ideas here.

 

First, one thing that helps me is my investments are going in on a monthly basis as contributions from my 401k. I like this because even if last month I bought at a higher price, at least I'm going to buy at a lower price this month. However, the roth IRA is usually just lump summed in once a year and all invested at once. It is a bit daunting I think because you wonder, is now the right time? Statistically as everyone has pointed out the day to day volatility pales to nothing in the grand scheme of a 30+ year horizon. It doesn't feel that way though. This gets better once the annual contribution limit to your roth IRA becomes a smaller and smaller portion of your overall portfolio. You could place your money into a money market fund getting ~2+% interest, then invest 1/12th of it each month into your asset allocation, dollar cost averaging your purchases over time if this would help you sleep better at night. I think big picture you are better to just be "in" the market, but if it is causing you a lot of angst this would be an option that might alleviate that.

 

Second, do you have a diversified asset allocation? When I first read WCI book and started perusing the forums I was thinking 100% stocks would be great. After reading more, particularly the All About Asset Allocation book, I decided to place a portion of my assets into bonds and REITs. Even though it is a small minority of my portfolio, when I login it is nice to see some green on the board. WCI has a podcast about why bonds you could listen to https://www.whitecoatinvestor.com/why-invest-in-bonds-podcast-72/ and probably over the long haul you'd still come out ahead just going 100% stocks with a long investing horizon, but until I've tested myself with a large pullback I decided to put some money into bonds, and so far I've been liking it. I might have a different mind when the market takes off again.

[Dreamgiver]

When the news show pictures of people on Wall St. pulling their hair out, I log into my accounts and buy more    And don't really care to check balances on a routine basis.

[artemis]

pulmdoc wrote:

My #1 tip is to automate the investment, then don’t look at it. The human brain is hardwired to regret loss and avoid it, even if the loss is unrealized. This leads to selling at the bottom and locking in losses. If I didn’t read these forums, I wouldn’t have even known there was a downturn.

Click to expand...

Which bring us to my tip #2:  TURN OFF THE TV NEWS!  It's really not news at all, it's content designed specifically to make you anxious, because anxious people pay closer attention to the thing which causes them anxiety -- in this case, the TV screen -- and that is exactly what the advertisers who are actually paying to produce that content want.  TV is a medium designed not to inform you of important developments, but to get you to watch ads.

Ditch the TV and just stick with reading a decent newspaper occasionally, and your anxiety over the current state of the market will decline noticeably because you won't be hyper-aware of every minute market downturn courtesy of some network "financial expert."  Believe me, if anything truly significant is happening in the word, you'll know about it even if you never turn on a television.

Automate your investments, turn off the TV, and just glance at a newspaper every now and then, and you'll find sticking to your investment plan becomes vastly easier.

[Kamban]

bullsdoc wrote:

Has seemed to obvious to me that it’s going to drop then I say to myself “Don’t try to time the market,” and I invest and as I would and then it drops! Hard to stay away from getting frustrated with this, really this is the first time I’ve started losing money in my investments. Any advice for staying the course?

Click to expand...

Even  a three toed slot will look like a genius investing in the bull market along with the foolish talking heads in the financial TV channels. But the real genius is the one who stays the course in the bear markets and does not waver. Thirty years later it will pay huge dividends.

In residency in May 1990 I invested 6561.00 in 100 shares of Kimberly Clark, one of my first stock purchases in this country. I used Peter Lynch philosophy of buying what you know. The stock split twice, in 1992 and 1997. After the 2nd stock split I added another $3000. From 1993 I reinvested the dividends to purchase more fractional shares with that dividend money ( since Charles Schwab would not do it I had the shares transferred to by name and held by the company's registered agent). Never did anything different in 2000 or 2007-08 bear markets. Have not added any extra money beyond the $9500 put in from my pocket. Even with the recent down market that $10K is now worth $129K.

So stay invested and don't change anything. Does not matter what you buy as long as it is sensible. In today's market it will be a total stock market or S&P 500 index fund. Buy and forget it. Unless you will actively invest all capital gains and dividends, just automate to reinvest it every quarter. And once again forget about it. In 30 years it will be a tremendous amount.