The Investment Rollercoaster
By Clayton Daniels, author of Fund Your Ideal Lifestyle
I
remember when I first started trading stocks. Before the likes of Raiz came
around, the only way to access the market was through a broker. These brokers
had minimums of $500. As a uni student a decade ago at 23 years of age, that
$500 minimum was a confronting minimum.
My
emotional investment was high. If the stocks went up, I was elated. If the
stocks went down, I was devastated. It was only at the end of a few years of
this type of investing – which of course didn’t end up all too profitable – did
I learn how unbeneficial it was to be emotionally invested in my investments.
Because
when investments go down, it doesn’t automatically equal a bad result. It’s a
bad result if you need the money straight away, but if you don’t, all it means
is you now get to purchase more of the asset at a discount.
This
is counter intuitive I know, but it is how the ultra rich get richer. When the
GFC happened, there was a massive transfer of wealth from the middle class to
the upper class because the middle class sold down at the exact time they
should have been buying.
At
the end of the day, if you are investing, you are accepting that what you are
buying is a fair price. If your investments temporarily go down, then you
should be buying in these moments. This very simple investment strategy is
called ‘buying in the dips’.
If
you are emotionally investing, this does not make sense. But this is why being
in control of your emotions during your investment career is so important. When
the roller coaster happens – as it will every year of your investment career –
take the opportunity to buy more. If you ultimately believe the world will
continue to produce value, and continue to earn a profit, then ultimately the
stock market will go up again, and so will your investments. Especially if they
are invested across indices such as with the Raiz portfolio. For more information on Raiz fees, click here.
If
your only response to a falling market is ‘sell sell sell’, then perhaps you
shouldn’t be in the market. Again, I know this is counter-intuitive, but your
investment goals should be to control your emotion, and buy more when the stock
market goes down, not the other way around.
We
all need reminders of this every now and again, and as we have seen some
roller-coaster action as of late, I figured this was a timely reminder.
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The information on this website is general advice only. This means it does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the product.
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The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.
Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.
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