Man, I leave town for a week and the world falls apart — I arrived back home to find Seattle socked in by dense smoke from raging wildfires and the stock market in the midst of a major “adjustment.” For those of you not familiar financial parlance, that is often translated to mean “crash.”
So what’s the first thing I did, immediately sell all my stock and run and hide to the comfort of government bonds or my mattress? Ha ha, no. I rejoiced a little inside and then did nothing.
Why? Because I know that markets have their ups and downs. When people are excited about the ups, they somehow tend to forget about the downs — then panic when they suddenly, unsurprisingly show up (show down?) again. It’s all part of the natural cycle and, as a long-term investor, I am 743% confident that the market will go up again. Maybe not this year, maybe not even next year, but it will happen, and I’m OK waiting.
Market downswings also represent a great time to buy. While I don’t believe in trying to “time” the market, there is no question you can get some screaming deals in the midst of an adjustment like this. Since you can’t figure out where the bottom is (and don’t believe anyone who tells you they can), just keep going with your automatic investing as you would otherwise and ignore the hype. I have an automatic withdrawal set up to invest $300 of every paycheck — no way I’m touching that baby now!
Slow and steady wins the race, as the turtles say, and I’ve already seen this in action. After I finished grad school, I started working in New York (on Wall Street, funnily enough, though not in finance) in September 2008, arguably one of the most financial-panicked times in recent memory. After several years of not saving or investing, I knew this was an opportunity I would silly to miss — I set up my new 401(k) right away with the maximum possible contribution. By continuing to live on my meager grad school budget (even with a shiny new high-paying job in a city known for its consumer temptations), I was able to reach the maximum contribution by the end of the year; then I kept going and maxed out my 2009 contributions by summer.
I haven’t done the math to figure out exactly how much that Great Recession-era money has grown, but I can confidently say it’s a lot. Like, a lot a lot. My retirement accounts are in great shape and I’m at the point where I don’t worry at all about having enough for my post-70 years, which is pretty darn awesome.
So the next time the market crashes, which given how this week is looking will probably be tomorrow, don’t panic, rejoice! Sit tight, laugh at all the crazies, and smugly know you’ve got this one covered.
© 2015, Cheddar Pie. All rights reserved.