If you think the market is "bleeding" or you're losing too much money, then you don't own the right investments. I make these posts regularly but this is a reminder for beginners that you need to make sure you can actually handle the drawdowns of stocks. We often forget that stocks are actually the riskiest form of traditional investing. On the scale of risk, being 100% in stocks/equity is the highest risk you can take. If you buy a GIC or put money into a HISA, your risk of losing money is essentially 0. If you put money into index funds, you have the risk of being down 10-50% on your investment at any point. If you decide to invest in only the stock market, you put your money at risk of losing value immediately. Over the short term, there's no guarantee that you will make money. An index fund works over the long term to make money (20+ years). Any short term movement is volatility, not risk. These are often confused, as the stock market could easily move 10% or more in any given period and it's not risk just volatility. If at this moment in time you're getting scared of how much money you're losing, you are either: A) Not matching your risk tolerance/capacity properly or B) Not investing in the broad market, At this time, an index like the S&P 500 $VFV is barely a few percent from all time high, and broad market funds like $XEQT are hitting new all time highs. There is no "blood in the streets", in fact we're experiencing great returns. If you're scared right now of how your investments are doing, it's time to reevaluate. If a few percent is scaring you, then being all stocks isn't the right pick and you should reassess your risk. On the other hand, if you're down 10-20% in a month or 2 that isn't normal, you're in too risky positions. Being down double digits in short periods is not normal for the market, it's normal for individual stocks at any given point. Companies like $AMZN and $MSFT to be down 10-20%+ in the past months is totally normal. These are the kind of investments that are bleeding, and if you're worried about being invested in them then it's time to rotate out of them. The market as a whole is not losing almost any returns, if you're seeing your portfolio going down way too much as a beginner, you need to actually realize what you're invested in. An index fund will not see -20% or more in a month given a very rare occasion. If you feel the need to talk about every -1% day, then you should adjust the risk you take. It's very important to make sure we pick the right investments that suit us. Too much risk can ruin any size portfolio, the market doesn't care about your financial situation. As always, do your research and happy investing!
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32 Comments
Turgay Serbetci@tserbetci · 6mo
Down 4.65% and I’m chilling.
Ian Bremner@Bremsey · 6mo
Exactly! Great post! See this every time the market dips a bit, we are 1% down from yesterday and it's "mass panic, blood in the streets" here on blossom. If people are crying over being down 1% any given day, what are they going to do when there is a real downturn of 20, 30 or even 50%? I can tell most people here have never experienced a "real" prolonged downturn or recession.
Shadow @shadow_grief · 6mo
great post but a lot of people are holding and buying $BTC which is probably why people are panicking. im personally down 6 percent due to this and its not taking a toll on me what so ever
Ken @kenvesting · 6mo
Great post, well said.
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