It's Ok if your Portfolio has gone down
I was having a conversation with one of my friends and he said that he has a big worry that his portfolio is down by 20% and he started investing last year when the market was at a peak. He asked me what is the best thing to do, redeem everything and stop investing or not invest now and wait for the market to go up at previous highs to start investing again.
I asked him one simple question, why he has started investing. He answered by saying that it is because he wants to accumulate wealth after 10 years. Now the thing is if your goal is long term then why are you worrying about what is the outcome in the short term. Today the market goes down, tomorrow it can go down more but there will be times when the market goes up and if you continue investing you will hit your goal.
Now if the market crash happens, it's good for investors in the long term because we can accumulate more now and when it goes up we will be in profit. The straight line is bad everywhere, it's better that the line goes up and down. Similarly, I have asked him to keep some money for himself and not invest everything in the market. Because if he needs that money tomorrow, he will lose some money. So yeah when you are investing it's better to invest that amount which you do not need for long i.e. what long-term investing is all about.
Like, I started investing 5 years back and my time horizon is another 15 years which means a total of 20 years long horizon. I have seen my portfolio going down by 30%, I have seen my portfolio going up by 40% and now sitting comfortably at 11% per annum. This means even if the market goes down or up, I am getting 11% per annum returns and if it continues for another 15 years, my goal will be set.
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