This morning I logged into my stocks and shares ISA and found out that my £500 deposit was now only worth £498! Where have those £2 gone? Was investing ever a good idea in the first place?
In the short term seeing numbers fluctuate up and down can be scary and daunting; especially given how much hard work is required to save and invest that money in the first place.
It is easy to forget in the midst of this that only a week ago, my investment was worth £506. So how can I avoid that sinking feeling in my stomach when it all seems to go wrong?
Only invest what you could realistically afford to lose.
There is an important reason why most financial gurus out there cite investing as the last step of a financial make over, after saving up 6 months emergency fund.
This money could probably give you a lot of returns. However, it may be years, or even decades before the investment pays off – depending on the market.
Having an emergency fund in an easy access savings account enables you not to depend on selling to get your investment back. And thanks to dear Murphy and his law, it would probably happen when the markets weren’t doing so great.
For peace of mind, only invest what you can afford to lose (even if nobody really wants to ever lose it of course!)
Remember you’re playing the long game
You’ve done your research and in good faith invested in what you thought were decent index funds, ETFs or mutual funds. All the graphs showed a steady increase for the last 5 years (apart from the blip in March). And now your investment portfolio is steadily losing value.
Don’t give up just yet. Have a look at the last 5 years and see how many high and lows the graph shows on a day to day basis and how the average still goes up over the course of the years. One of the huge difference between a fixed interest ISA and an online stocks and shares ISA (like Vanguard for example) is that the daily variations of the market are reflected in the day to day value.
Don’t get obsessed with the numbers. Just let it do it’s magic in the long term.
Don’t forget, it’s all about learning
I admit that seeing the numbers going down can be unsettling at first and that long term investors seem to have nerves of steel. The good news is: you are becoming one of them!
At the end of the day, people can research for years how to make the best investment, makeup strategies as to how to (hypothetically) time the market and what the best brokerage is… the only way to learn about investing is, unfortunately, to invest!
It is by going out there, out the comfort zone of the ‘what-ifs’ and ‘maybes’ than the most powerful lessons are learnt.
This initial learning and experience then serves as a solid base for further learning and understanding in finance magazines, FIRE forums or Youtube videos.
Enjoy the learning curve!
First save. Then invest.