In a matter of weeks, I saw my portfolio erode at a rate that I thought was only possible in months/years instead days/weeks. The other day, I was looking at the disastrous performance of my stock investments through financial statements and asked myself one question: “Did I make a financial mistake by investing in stocks this year?”
These “after-the-fact” type questions usually does nothing but make me feel worst but I felt the need to give an honest attempt at answering because being invested this year was by far the most detrimental to my wealth.
As my thoughts race through my brain, the answer became increasing clear to me that starting to invest in stocks was not a financial mistake. The decline was definitely something I wish I avoided, but to call it a financial mistake was just not correct.
To carry on the discussion further, let me share with you some of the notes I took in my imaginary wall:
We Decide Based on Possible Outcome, Not Results.
When I chose to pour my savings into the stock market, it was based on the rational decision that:
- Stocks outperformed other asset classes in any 20-year period
- I was young enough to have many years of income to cover any potential losses
- My time horizon was long
Due to the fact that we can’t predict the future and there’s no “undo/retry” in life, we decide the path to take based on all the facts present. My investing approach was based on past history and my circumstances. My wealth took a disastrous dive but short term performance was simply not part of my consideration. I’m looking for long term gain, and these types of short term decline was what I was willing to tolerate and should be expected.
I Actually Made the Choice
Indecision is always the worst mistake that one can make. If I did not decide to begin investing during the good times, there would be no way that I would start now when everything looks dark and gloomy. As a result, I may never start investing. It would preserve my capital this year, but earning 3% a year (and being taxed every single year) is definitely not advisable over the long run.
What I Do Consider a Financial Mistake
Let’s face it, many of us lost more money this year than any other. However, financial mistakes should be left for those decisions that we make when the facts points to the likelihood of financial disaster (Taking payday loans, splurging on credit cards without the funds to pay them off immediately, buying a new car just to keep up with your neighbors etc come to mind).
Deciding to start investing in stocks will never be a financial mistake. Ever.
Promote or Save This Article
If you like this article, please consider bookmarking or helping us promote it!
Print Post | Email Post | Del.icio.us | Stumble it! | Reddit |
Related Posts
- Best of Personal Finance Blog by MoneyNing – December 2008
- Investing 101
- Stocks Fall Again To Start The Year
- Move On From Our Mistakes
- From a Yield of -99.79% to +9.99% This Year So Far
Subscribe! (and Get a Mini-Course with Free Registration)
Follow me on twitter! In addition, subscribe to grab free amazing content or take advantage of the newsletter to have content delivered to you. For starters, a 7-part mini course to help you spend less and be happy will be delivered to you when you subscribe!(Don't worry about spam, because we hate it as much as you do!)
{ 15 comments… read them below or add one }
Great Blog, insightful, & well written. I’m looking forward to reading more from you.
Thanks,
Darrell
http://www.AlwaysMakingMoney.com
——————
Learn From Experts, Increase Your Wealth
I, too, am not sorry I have been investing in stocks. In fact, I’ve increased my retirement contributions to take advantage of the low, low prices. I’ll be much happier for it down the road.
Miranda: Good for you
Increasing your contribution is the way to go in this market!
Nicely put. My wealth has diminished drastically this year and while I’m seriously in need of something good happening, I agree that investing is actually one of the better decisions I made through the years.
Agreed precisely. Given how long you still have until you’ll need your retirement money, this current downturn (as large as it is) doesn’t hurt you at all.
Same thing goes for myself and millions of other investors. Now if we could just get the media to stop selling fear…
Good post. I agree that investing was not a mistake. It is impossible to time this market. 5, 10 or 20 years from now the results should be better.
I think the other side of this too is that NOW is especially an important time to begin or continue investing for the long term. I’ve been watching many people STOP their 401(k)/IRA contributions in the past couple weeks or months and feel the urge to say, “the loss already happened…don’t stop buying now that prices are LOW!” stay the course people, stay the course…
I agree with you. When you lose money with an investment, it does not mean that you made a mistake. As a matter of fact, you may even make a mistake when you make money. Just think about these folks, some of whom I know personally, who invested heavily in real estate ignoring all rules of proper asset allocation. They were on top of the world making money two years ago. It is all too apparent that this money making scheme was a big mistake even if you got out early enough and ended up making money overall. It is better to stick with sound strategies than to chase the next “big thing”.
Shoot, any time you’re saving is a good time. I tripled my retirement contribution and doubled my husband’s. I’m fine if we hover at this level for a couple of years, really.
The biggest profits are usually made by the wealthiest ppl during “economic down times”.
Well put. In fact I have made a concerted effort to invest more than I have ever invested during October, November, and this month. These levels are great for long term investing in dividend growing stocks. I’ve even employed a moderate amount of leverage in order to do so.
Indeed, investing this year was no more a poor decision than investing in 1999 was a great decision. In both cases, if you are far from needing the money (as you are), it’s the right call. So easy for others to say they have a long-term time horizon and aggressive risk tolerance while things are going up. Glad you’ve hung on and will benefit from this dip, no matter how severe or protacted.
MN I love seeing your thought processes on paper and I think you nailed it, although I don’t think I would be gutsy enough to say that the US stock market will forever be a good investment.
i bought stocks that pays good dividend. its very good to receive checks once in every several months. also, stocks that pays good dividend do not fluctuate much..
buy stock of good companies when it is in its low, like this time. this is what warren buffet does, he is the richest now!