Keeping your cool when stocks go down

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 differences 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 of the latter.

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’ that the most powerful lessons are learned. This initial learning and experience then serve as a solid base for further learning and understanding of the wonderful world of investments, whether you read finance magazines, go through FIRE forums posts or watch Youtube videos on the topic.

Enjoy the learning curve!

To conclude:

First save. Then invest.

Going back to basics – expense tracking

Image by Bruno /Germany from Pixabay

Every financial blog post, podcast, Youtube and article that I have read over the last two years have contained this one piece of advice: ‘track your expenses’. This was usually followed by: ‘create a budget’.

I have during different periods of my life definite phases:

  • the ‘I have no money so what’s the point’ phase
  • the ‘Not having a budget works for now, why bother’ phase
  • the ‘I need to track my spending obsessively with loads of charts phase’
  • the ‘I missed a week, I give up!’ phase

You may recognise yourself in one or more of those. I know that I have cycled through these quite often at different times. However, there was a golden period of 4 months were I did have it down to a tee. That’s what I aspire to go back to.

So what should I have done differently at the time?

Find a really motivating long term vision.

Image by <a href="https://pixabay.com/users/ToNic-Pics-3001971/?utm_source=link-attribution&utm_medium=referral&utm_campaign=image&utm_content=1573529">Tom und Nicki Löschner</a> from <a href="https://pixabay.com/?utm_source=link-attribution&utm_medium=referral&utm_campaign=image&utm_content=1573529">Pixabay</a>
A long term vision.

In that golden era, I recorded all my spending and savings and knew exactly where every single £1 went. I saved enough for my yearly car insurance with a sinking fund; I even saved for Christmas presents. However, there was one problem that affected the sustainability of my system: I didn’t have a long-term goal.

At the time I hadn’t even heard of the FIRE movement. I didn’t have any concrete financial aspirations. I had never even considered investing in the market or real estate as an option. So when I saved money, though it did feel good, I didn’t have a clear purpose for it other than spending it later.

Since getting more interested in personal finance, I have discovered the caveat of not saving/investing for retirement. I have learned how inflation very slowly gnaws through savings. As a result, I have found out I cannot afford not to invest in my future.

Know your milestones

As you saw in my last post, there are some resources out there that can give some realistic and broken down milestones for financial goals; whether it is saving 3 months of expenses for an emergency fund, investing enough to cover basic living expenses, or just striving to be debt-free.

Creating a long term plan with realistic and achievable goals is the one vital thing I didn’t do during that 4-month golden phase. As a result, the £10 I saved on my phone bill, the £5 I didn’t spend on drugstore make-up and the £3 I saved by packing my lunch that day just got absorbed by my everyday spending.

What I do in those moments now is take out a calculator to work out how much closer to my goal I would be if I didn’t spend that amount. Even if it’s 0.00012%, I know that it is making a difference. Charting progress on a graph can also help to see this change visually.

Learn the art of delayed gratification

This is by far the most difficult one for me at the moment. I want to see progress and I want to see it now!!!

I know how frustrating it is to see number creep up super slowly. Times where I have set backs and times where I overspend. And times where I think to myself ‘is it really worth it?’

I want to throw in the towel, give up the hard work of going through my accounts everyday, writing everything down, planning every expense and be disciplined in my spending. I just want to live in the moment, ‘Carpe Diem’ and buy that thing I really want.

However, I need to remind myself that though the process takes time, it will be completely worth it one day. I know this because of the inspiring testimonials of people who have done this before me.

To conclude: This is something I am starting to work on from now. I hope to be able to share this journey to inspire and motivate people on their own journey.

Our Rich Journey

For today’s Inspiration Station, I wanted to share here a video from this special family. Amon and Christina are part of the FIRE community (Financial Independence Retire Early) and share in this video different levels of wealth that can be aimed for on the way to financial independence.

It can be so easy to become overwhelmed when setting huge goals or ambitious projects. I love how they have broken it down step by step into more manageable goals.

I highly recommend their channel for inspiration and practical tips in your own financial journey.

To conclude: A great reminder that baby steps all count!

I will definitely be using their stages in planning my own financial journey to the coveted million £££!

3 reasons I love watching motivational videos

They have grabby titles, eye catching thumbnails and bold claims on how they can change your mindset: the motivational video movement seems to grow year upon year on video platforms.

Although my introduction sounded a little sarcastic, I genuinely love watching and listening to this type of content. I am listing here three reasons why I love these videos and will link to some of my favourite in this post.

1) Motivational videos are often well edited and pleasing to the eye.

Okay, so this first reason may not be ‘the best’. But hear me out.

You are taking time out of your day to listen to or watch content on the internet. How much more enjoyable is the experience when the background music is epic, there is a cinematic feel of the editing of film extracts and the true grit demonstrated by some of the people in the video makes you feel you could do the exact same thing?

Motivation video

2) Motivational videos give some good advice

There is many a time when I have sat down to watch one of these videos and thought to myself: “Yes, that is indeed good advice”. Who would disagree with the suggestions of watching less television, eating healthier and becoming more proactive in life?

Most of the advice is sound and can be laid out in a different way so as to make it click. Who knew that a change of perspective could give such Aha! moments. I admit that agreeing with the advice doesn’t mean that I always find myself applying it afterward, a fact which I will explore in another post. In the meantime, I am grateful every day that I have such free access to the internet and the billions of tuns of information that comes with it.

3) Motivational videos are … motivational

I love that feeling after watching a motivational video. Finding that gem, then listening intently to all its content and feeling a sense of accomplishment and change. It feels like research, like an essential component to get or keep going. I am bettering myself. I am learning.

Despite the caveats to this that I will explore in another post, I thoroughly enjoy the rush of purposefulness that follows watching this kind of content.

One of the lectures that I have enjoyed watching in the past is the following:

To conclude: I have heavily focused here on positive aspects of this kind of content that I enjoy, but I am sure that you can tell that there is a darker side to all of this… To be continued… 😉