Do you have the guts to invest? You will experience some very volatile markets. Last December the markets dropped by 15-20% before moving back up in January and February. This volatility is expected. If you invest in equities, you’ll experience large swings.
You Will Lose Money in Volatile Markets
It’s not an if, but a when. You will lose money investing in the stock market. There will be years when equities are down by 40%. You have to be able to stomach this.
Now, of course, you can mitigate some of these risks by diversifying your portfolio into bonds, but that’s not the point here. The point is that stock markets are volatile markets, and regardless of your feelings, they’ll move up and down a lot.
So there will be moments when, on paper, you have lost money. Lots of money. Let’s assume you are 100% invested in equities. If your investment portfolio is 100,000 euros, you could lose 40,000 euros during a market crash. If you invested 500,000 euros this loss could be as high as 200,000!
That’s a lot of money, but it doesn’t matter! Whatever the crash, you don’t sell. It’s that simple. Just sit back, delete your brokerage app from your phone, do something else with your life, and enjoy the ride. It doesn’t matter how volatile markets are, they will recover.
Bitcoin Taught me To Enjoy the Ride
Early 2017 I started investing in bitcoin and some alt coins (I really like litecoin!). The ride up in 2017 was phenomenal. I made about 20X my total investments. Then late December 2017 the fall down started.
During this crash, I have long been in the green. The ride up has been good for me, and I did sell some coins during the highs of November and December 2017. But not enough.
With a market closing at
I will continue trading cryptocurrencies a little here and there to increase my holdings, and sell off some when prices get better again.
What this crash in crypto taught me is to sit tight and not worry. I found it hard to do this when I was losing lots of money. But you know what? It made me more equipped to handle downturns in the stock market which is a good trait to have.
I Won’t Sell
I won’t sell off my investments every in the case of a market crash. No matter how volatile markets become, I will hold and continue to buy every single month.
Bitcoin taught me the skill of grinding through massive (virtual) losses. It’s been a great learning school, one that I will remember forever, one that will prevent me from selling my assets during a market crash.
If stocks crash 40% tomorrow, I will just buy some more. That’s how long term wealth is built.
Do you panic sell when you see the market correcting? Let me know in the comments.