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About a month after I transferred my investments over to Wealthsimple in pursuit of socially responsible investing options, I logged in to ensure my first monthly direct deposit had gone through to my SEP IRA properly.
It had, but I also noticed something less assuring. My investments had lost 1.2% of their value over the course of the past month, a dollar amount of about $138.
I could have taken that as an indication that I had picked a bad robo-adviser, but that would have been an unfair and inaccurate conclusion. On the contrary, I am happy with the services to date, despite that initial loss.
Why I don't freak out when my investments go down
My investing goals are long term. In my 30s, I am saving for retirement. When you set a long-term investing goal, worrying about every little dip along the way can add unnecessary stress to your life. The fact is that while the stock market fluctuates, historically, it has always gone up over the long term.
As someone whose investment goals are set up over the course of 30+ years, I knew when I saw that -1.2%, things would be okay. It wasn't an indication that I was off track. It was an indication that the market was fluctuating.
Short-term goals are different
If you're saving for a short-term goal, it's going to be more stressful when you hit those dips. Your investments are not likely to be tax-advantaged like the ones in my retirement accounts, and short-term fluctuations are more likely to have an effect on your attempts to reach your goals.
If you're saving for a short-term goal, a high-yield savings account might be a better choice - it's low risk and your cash will be more liquid.
Aren't you scared there will be another recession?
As far as my investments go, I'm not overly concerned about the possibility of another recession in the near future. My investments will lose value, to be sure, but I would expect to hit at least one recession over the course of such a long-term effort.
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I also won't stop investing during the recession if I am fortunate enough to maintain my income. When a recession hits, it's somewhat similar to stocks being on sale, depending on how cynically you view economics.
When you buy low, which you would be doing during a recession, your investments are highly likely to go up as the market recovers. If the companies you invest in make it out of the recession, that is.
My investments have already bounced back
It's been about a month since I saw that dip in my investments. True to the roller-coaster-like nature of the stock market, my investments are no longer down. In fact, I'm back up to 1.3% overall growth from that -1.2% number I saw last month.
I won't be surprised if the next time I log in I see negative numbers again. I'm not going to tune in to watch TV pundits speculate or pull my money out of the market should I go into the red for the short-term.
I know that obsessing over every last market movement isn't healthy or helpful for my long-term goals. If I panic and pull my money out, I'm essentially buying high and selling low. As long as the American stock market is around, my portfolio will be, too. Because my goals are long-term, I can sleep easy at night.
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