Why losing $28K in the stock market doesn’t faze me

August 9, 2011

Finance

“Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful.”

-Warren Buffett

This month, my net worth decreased by approximately $28K. There are those who might believe that this is cause for concern. However, a smart investor is not swayed by the short-term ups and downs of the market. He understands that the nature of the stock market is volatile and that in the long run, there is still no better vehicle for building your net worth.

So, how should you react to the current market crisis? I’ll tell you what you shouldn’t do. You shouldn’t be like everyone else and withdraw all your money or stop investing. In fact, you should be happy that the stock market is on sale and that shares are cheaper than before. To sell or stop buying after a market crash is to violate the principle of buy low, sell high. Instead you end up selling low and by the time you get back in the stock market, you will most likely have missed a fleeting window of opportunity to recoup your money.   I believe that you should take the following actions:

1) Continue to invest as if nothing happened.

2) Continue to live your life.

Don’t worry about what the market is doing right now. You’re investing for the long term.

4 Comments on “Why losing $28K in the stock market doesn’t faze me”

  1. Andrew Moy Says:

    You know how many lap dances we could have bought with 28k?

    Reply

  2. Anonymous visitor Says:

    It’s “faze” not “phase”

    Reply

  3. Nuno Says:

    Hi,
    Interesting blog. I would like to point out just the following: if I am not wrong for what I have been reading you have decided to go with passive investing (on index funds or similar). I can’t understand if you know that passive investing holds market risk. You seem
    to have taken for granted that the market will rebound after a fall. Usually that is true on macroeconomic terms. That means 40/50 years.
    Nevertheless I would like to say that during the 1929 crash a broad index has fallen something like 80%. It only got to the previous levels 20 years later.
    I would like to know how do you manage such a situation?

    Reply

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