The stock market has seen some serious volatility the last couple of weeks. After a bull run for the last decade, we have not seen a lot of these swings. Alright, in February people thought the end of the world was near when the S&P 500 corrected slightly over 10%, but from there it was a smooth ride to the top right of the graphs. Now it seems volatility in the stock market is back.
Two weeks ago we saw another correction, this time of about 7%. The correction happened world-wide, with not only US and EU equities getting slashed, but stocks around the world got hit.
Why Would You Care?
If you do own stocks, there’s nothing to worry about, unless you need the money right now. But then you’ve made some wrong moves in the past. If you need money right at this moment, please don’t invest it in the stock market. Especially don’t invest it in a stock market that might turn upside down soon (or it might continue for another 10 years, who knows?).
So, if you’re getting nervous with your money in the market, remember the following. If you have a proper investment plan in hand, and you’re saving a decent chunk of your income every month, don’t do anything! Just keep following the plan. In the end everything will work out.
If you don’t yet have a financial or an investment plan, start making one now. It’s so much easier to stay the course if you can just follow the rules (that you created yourself). Without a plan, you’re flying blind. Every time something happens, you will be anxious whether you made the right choice. Make a plan now. Write down your goals, and how you’re going to get there. Then execute on it.
Market Corrections and Crashes
Markets tend to correct and crash. I haven’t lived through a real crash while investing myself yet, but by now it’s common knowledge that markets do correct and crash every so often. I started investing in the middle of the bull market we’re in, so I havent’t really felt the 2002 and 2008 crashes myself.
However, I already was invested during some of the more recent turmoil in the markets. For me it didn’t matter. Of course I get nervous sometimes, when you see your portfolio shrinking by the day, but I knew this was going to happen. And it will happen again. And it will be way worse.
Crypto Has Thought Me
Also, I think a good practice here are my trades in cryptocurrencies. I have been trading crypto since the spring of 2017, so I started right at the start of the massive 2017 bull market. I have seen my portfolio grow to immense amounts in December last year, partially from additional investments, but also from profiting from swing trades.
But after this enormous bull run to December, I also saw my portfolio fall by 70%. Today, my crypto is worth maybe a third of what it used to be just 10 months ago. That is crazy, I know, and the amounts are quite significant to me. But it has been a lesson learnt for me. I didn’t follow the plan of allocating 10% of my investments to crypto.
I got greedy, and instead of profiting from a trade and taking the profit out to invest in ETFs, I let the profit sit there and fuel bigger trades. It did pay off, I made substantial paper gains, but right now all of that is gone. Lesson learnt. I’m still trading, but now with the goal of lowering my cost basis so that if and when crypto starts gaining value again I will be able to take out profits much earlier instead of having to wait until we see December 2017 levels again.
So in short, don’t worry about the recent movements in the stock market. It is normal, and we’ve seen more steady growth than ever before. Just write down your goals, work out a plan to get there, and stay the course. If you want help with your plan, I’m can assist you if I can write a blog post (anonymous of course) about the case study.