Disclaimer: This post is not about buying shit from stores or from the internet over the Holidays. It’s about taking advantage of the recent drop in the stock market to buy more index funds. Sorry if this disappoints. 🙂
So I am the last person to pretend to be some kind of financial guru or expert when it comes to money. I watch my money like an eagle, poring over every detail, and I certainly have a passion for managing my money, yet I don’t think my credentials to date yet qualify me as an expert. But the cool thing about this blog is that I get to write about whatever the hell I want, and by now, you probably know that I like to write about money now and then. So here goes..
As I have written before, I believe strongly in index fund investing. This year was my fourth year doing it. Therefore, I have had some time to examine my own reactions to the process, and to train my brain to think in a way that is conducive to long-term investing success.
Generally speaking, I keep an interested eye on my portfolio balances. I generally check daily to see how the market moves and how my shares are affected (by the way, people often recommend that you “set it and then forget it,” but so far I haven’t found checking to be stressful or unduly time-draining, so I’ve indulged my curiosity).
Not surprisingly, what I found is that I easily got excited when the market moved up. 2017 was a great year for this, as the market basically moved up the entire time. I often found myself experiencing a small rush of excitement whenever I saw the numbers in my portfolio rising. I realized that this was much how I felt during many a baseball season, checking the box scores after SF Giants games: always a pleasurable activity when my favorite team won, a not-so-pleasurable activity when they lost. Just like in my baseball-following days, I saw the same pattern of being addicted to “winning” and feeling bad about “losing.”
I wondered about this. I have read from day one of investing that there are going to be ups and downs in the market. One needs to be psychologically prepared for this. In fact, if you are conditioned right, you can see drops in the market as opportunity to take advantage of lower prices.
2017 may have been a joy for the part of me that feels a dopamine rush from “winning.” 2018, of course, has been quite different. If you’ve read the headlines, you may know that the market has lost about 15% in the last few months alone. Anticipating that something like this would happen, and wanting to condition my brain to look for “wins” in a down market, about a year ago I started setting aside little bits of money in a savings account. I decided I would use this money at some future point when the market was down. I called it “Opportunity Money.”
Over that time, my little pile of “Opportunity Money” grew to a couple hundred dollars: not enough to worry about, but enough to notice. Last week I decided that now was an opportunity to make use of my little pile. We may not be in a full blown bear market yet, but we are rapidly approaching it. So I transferred the money and put it into one of our investment funds. I felt really good about doing it. And I felt that I had slayed some inner dragon that only saw a victory in the market going up.
It may seem like a strange thing, but I think that putting aside a little money at a time and then using it when the market is a bit down has helped train me to look at the investing differently. It isn’t only about hoping that your portfolio goes up all the time. Think about it this way: if you are buying shares in a fund, then ideally, you want to be able to buy as cheaply as possible, do you not? What do you think a down market gives you? Cheaper shares!
In the face of a year with “bad returns,” and a market that has crept ominously downward over the past three months, I have been calm about it, even eager and curious, the whole time. This is directly a result of me training my mind to see this as an investment opportunity, not simply to salivate like Pavlov’s dog when the market closing bells rings at a new high.
And this is why I remain calm about what events are going to occur in the next few weeks, months, or years. I’m confident that something good will come no matter what happens. When the market goes up, the part of me that feels like a fan in a baseball stadium will cheer with the other fans. And when the market goes down, I will privately cheer my good fortune of being able to buy on discount.
Meanwhile, sound the trumpets, because it is Buying Season! Go out and buy more index fund shares!