With the stock market struggling, it’s easy for us to think about not investing at all and keeping all our money in cash. I remember a year ago when personal finance bloggers all over the world were blogging about their success in the stock market, encouraging everyone to keep investing and talking about how stocks are the best performing asset class over any 20-year period. These days however, no one really shares their stories anymore.
So what now? Do we just stop investing? What about our automatic contributions like 401ks and IRAs?
Since there are only three possible answers to this question, let’s talk about all of them here:
Staying Steady
These are probably the set it and forget it types. Some of these people might not care too much about their investments, only to find out at a later point in their lives that the majority of their net worth is made up of the investments that they forgot about. They keep investing through the good and bad times, which is exactly what we recommend here at MoneyNing. By the way, I kept my 401k contribution rate at 15% this year.
Decreasing the Contribution Rate
Many people fall into this category. They do it because gas has gone up, they do it because their homes have decreased in value, they do it because they want that new car. In reality, they did it because they are emotional and saw the great big fall in the stock market. They saw their investments tank and couldn’t bear anymore pain. Some people usually learn one day that this is not the way to invest, but most will never learn and end up missing the opportunity to create real wealth through investing.
Increasing the Contribution Rate
These are opportunists, and probably someone who don’t need the money in the short term. They like the stock market, and will try to adjust their contributions to take advantage of market declines. Eventually, they will be better off because they contributed more money than they otherwise would have.
So which approach did you take with this market decline? Which one would you take if you were given the choice again? If the answer to the two questions were different, is there a reason why?
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{ read the comments below or add one }
I will increase my monthly contributions–I feel like I’ve made good choices, and for now they’re on sale.
Sincerely,
Amanda
I would love to increase my investment, but due to other expenses increasing such as an increasing groceries, transport and medical, looking for that spare cash for investment will be difficult.
Dividend: Great thinking.
marci: Having a house is great 🙂 I’m sure your investment is well worth it. I think working part time is a great idea because of health insurance. Full retirement might be too boring.
philip: You are in the great position since you will end up buying EVERYTHING at a discount to start off which is much better off. Good luck in your investments and life ahead of you.
Mine increased but that is due to just starting a real job and just now getting to use 401k. I guess mine actually went up infinitly. Hopefully since I am starting now my losses are minor but buying at a good discount too.
Increasing.
It had taken a back seat for 2 years due to my house addition/remodeling…from 460 sq ft to 1036…still not big, but enough 🙂 All cash…
So now,with that cash outlay behind me, I will up the ante again with the investments…I retire from 1-8 years, depending on when the mood strikes me. 32 hrs/week seems to be working just fine for me right now as it includes health insurance.
I increased my contributions. I won’t need the money for 2-3 decades anyways. That’s why I don’t have any bonds in my portfolio as well.
I will increase for sure
Mouseclone: That thinking is perfect in this environment. If you keep this up, I’m sure you will create real wealth.
Mouseclone: Wow I don’t know if the gun advice is good for everyone but I agree with you totally on the increase in contribution rate.
I would increase. Personally I feel that the best time to invest is when the market is at its lowest. You can buy more with less. Then when it goes back up, you will have plenty.
Cash will do you no good if something major happens. What will do you good is a gun, because if shit hits the fan, people will steel and murder to stay alive.