The Money Mustache Community
General Discussion => Welcome and General Discussion => Topic started by: bnadz on February 05, 2018, 06:34:50 PM
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I just fully invested my 2017 Roth ira with some windfall late last week (Vanguard Low-Cost Index Fund). This is my first time investing in the market as I just graduated college. My $5,500 lost over $400 in a couple days.
How do I mentally cope with this? I am very frustrated with my first experience.
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Don't do anything and wait like 30 years! :)
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Sometimes the market goes down. If it went up all the time, then it would return the same percentage as a savings account. Volatility produces returns.
All you need to do is ignore it. Check the account next year when it's time to contribute your next $5500.
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It is very frustrating to see your assets decrease in value. Try to keep to your plan and it should all work out over the long run.
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Unless you went to college in your 60s (and will be using the money soon), you should ignore the short-term gyrations and trust that when you are going to retire (several decades from now), that the last week's worth of gyration will have been long forgotten.
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look up the performance of the plan on a line graph chart... Zoom out to the 5 or 10 year window. Sit back crack a beer and let it ride. It is like your monthly budget, it goes up then you pay rent and it drops. Next month there's a little more. This ain't no scratch off lottery ticket. Give it time to work.
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I opened my first investment account right before the dot com bubble burst. And then the entire decade of the 2000s kind of sucked for returns. It doesn't matter. The market will be back up eventually. Keep buying. Stay the course. Your first investments have the most time to grow and will make the most money eventually, BUT you have to leave it in the market and keep plowing money in for that to happen.
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Thanks for the reality check everyone!
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One way to manage your own brain is to dollar-cost average: instead of waiting and contributing all at once, set up automatic monthly transfers. That way, when the market goes down, you can focus on how many more shares your money will buy next month. In fact, at this point in your investing life, you should actually want the market to go/stay low so you can have even more shares when the market goes back up (although I know it doesn’t feel like it!).
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My wife and I celebrated today.
The bad news: We are $10,000 less wealthy than we were two days ago.
The good news: Every two weeks 60% of our paychecks pour into VTSAX, and stocks are on sale right now.
The best news: Since we aren't going to sell the stocks for a LONG time anyway(and neither will you), the 10k hit will have NO NEGATIVE EFFECT on us whatsoever...so guess what...there is no bad news!
Market corrections are the best, crack open a glass of free tap water and celebrate!!!!!
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If you have a long time horizon and you are still contributing then market drops are your new friend. Everything goes on sale! Your dollars buy more shares.
Which would you prefer?
Markets goes up 10% per year for 20 years.
Market drops 99% in year 1, stays there for 18 years, and then just gets back to even in the 20th year?
Assuming $10,000 contribution per year.
Scenario 1: $572,750.
Scenario 2: $18,020,000.
In scenario two the last year requires 9,900% returns to make up for the 99% drop in year 1.
Market drops help you when you are still saving.
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"The most important organ in the body as far as the stock market is concerned is the guts, not the head.
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"The most important organ in the body as far as the stock market is concerned is the guts, not the head.
Indeed. You have not lost any money when you don't cash in your stocks. Stock investments are a long term investment. You shouldn't need to cash them in any time soon.
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If you'd told me in 2008 that I'd eventually be glad of the drop in the markets, I wouldn't have believed you, but the amount I had invested, and "lost", was trivial in comparison to subsequent gains. I'm only glad that the investment was in a retirement savings product that I couldn't touch, otherwise I might have got nervous at just the wrong time.