In 1999, I was still in college, but worked a part-job that paid a decent wage. I took a lot of the money I earned and plowed it into the stock market purchasing individual technology stocks. I would check the value of these stocks several times a day. When I had breaks in between classes, I would run to the computer room to check on my account. If the value dropped, it would ruin my day. If the value rose, I would be on top of the world. When it all came crashing down, it was truly depressing for me and for most of the world! Prior to the crash, most people talked about investing in almost all conversation. Magazine and newspaper articles were about investing. People started investment clubs. After the bubble burst, no one talked about investing, no one talked about the stock market for quite some time. It was one of the most emotional times in investing in my lifetime.
Over the years, I have moved my portfolio from individual stocks in 1999, to an asset based allocation in mutual funds and ETFs. The problem here is that the portfolio is tied to the market so the wild fluctuations in 2008 surely did not sit well with me. Many people were panicked during the stock market crash of 2008. My parents were calling me to ask me what they should do with their accounts (they immigrated to America, but are naive to investing).
My Current Approach
I will not retire for another 20-30 years so I can ride fluctuations in the market. I am now invested in moderately aggressive funds, but I also have a good amount of cash and a good chunk in a conservative fund. Based on my age, this may not be the best allocation according to experts, but it gives me peace of mind. With the S&P hitting 4 year highs recently, I don’t care if it drops 10%, 20%, or 30%. Sure, I’ll lose a lot of money, but I have a significant portion of my assets in cash, real estate, and conservative funds. I no longer care if the market goes up or down in a relatively short period of time. What I care most about is that I am getting good returns and that my net worth is increasing exponentially over time.
Are you still emotionally tied to your portfolio? Does a drop in the market change your attitude? Does a rise in the market make you feel good? If the market dropped 10% tomorrow, would you have a pitting feeling in your stomach?
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