I normally try to keep the titles of my posts very short because space is very limited in these little instagram squares but for today, I made an exception because there is no content. So I made a very long title.
But here’s the point: I’m not changing anything and neither should you.
You may have noticed the market is dropping. The S&P 500 is down for the fifth day in a row. It’s down almost 12% from its all time high set just a few weeks ago. Any drop over 10% is defined as a “correction”. What does all this mean for you? Nothing. Keep doing what you were doing. Invest early and often. Stay the course.
Here’s why. Your personal investing situation falls into one of two different categories. Either you’re retired or you’re not retired. Let’s break it down:
* Not retired: That means you’re in the wealth building portion of your career. If you wanted to invest three weeks ago with market prices higher than they are today, then you should REALLY want to invest now. Because when you put money in, you get more shares for less money. When you’re exchanging money for shares, the more shares the better!
* Retired: If you’re retired, first you shouldn’t be 100% in stocks, so this type of thing doesn’t stress you out as much. For example if you’re 70 years old and invested in a 2020 target date index fund, your investments are only down about 6%. So what do you do? The same thing you were doing. Live on 4-6% per year and leave the rest of it to continue growing.
You might be thinking something like, “yeah, but the market is DROPPING so why not get out now, and get back in at the bottom?”. Because we don’t know where the bottom is until it’s behind us. Most 5% drops don’t turn into 10% drops. Most 10% drops don’t turn into 20% drops. So if you sell (or stop contributing) down 12%, then next month the market is up 20% you’ll underperform the market by 32%!
Is that going to happen? I have no idea. But I do know that the more you try to be tricky, the more likely it is to hurt you rather than help you. Stay the course.
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.