The whole point of investing your money is to make more money. So what do you do when your investments start going down for a few months? Assuming they weren’t bad investments to begin with, the answer is often to hold on to them.
Photo by John Morgan
As personal finance blog Money Smart Guides points out, dumping investments when they start dipping a bit is a quick way to lose any unrealized gains. Economies ebb and flow. This is natural. So, just because you see your account in the red today doesn’t mean you’ll be broke tomorrow. This was a lesson the author learned while managing the investment funds from clients whose collective worth was over $US500 million. And, as the author points out, more often than not, buy and hold worked:
Those that followed our philosophy of buy and hold investing did well. In fact, most earned back the money lost from the market crash in 2008 by mid-2011. We did have one client though that didn’t do so well. He was a trader and would make all kinds of trades based on his “hunches” and “fears”. His portfolio was always down while his wife’s, who followed our advice, was usually doing well. He questioned why her returns are always so much better than his. He didn’t like the answer.
Does that mean that every single investment will always go up? Of course not. If you’re not sure what to invest in, ask a financial professional. However, it does mean that the day-to-day changes are not reflective of an investment’s performance on the whole. Don’t be afraid to wait out a financial crisis. The only guaranteed way to lose money is to sell low.
What I Learned Managing $500 Million Dollars [Money Smart Guides]