604: Long Term Investing Through Short Term Volatility

Long and Short Term Investing

I've always enjoyed investing but one downside of watching markets closely is that it's easy to get spooked (Halloween reference!). And yes I've been spooked before. I started investing right before the Dot Com Crash, and I was really active during the GFC. I made some good moves but in both cases I ended up making long term moves based on short term spookiness. Yes, 2 years can be called short term.

To be fair, if you invested during the tech bubble and the credit crisis, you will remember that it was very, very spooky. 

The other factors were:

• I didn't have a lot of extra money, so I felt like I was losing money that I needed.
• I was paying close attention to a few writers who were confident that markets would stay down, or retest lows, or [fill in the blank with smart sounding reason to worry].
• I didn't distinguish between Long and Short Term positions.
• I got outright bearish and tried to make money going short, and failed, which only worsened my mindset.

Lesson Learned

Being underinvested, at least in the equity markets, cost me dearly. There's no sugar coating it -- I missed out on several years of gains. I had other investments that did well, but I'm noting that to make myself feel better. 

However, I got my chance to course correct during the Covid Crash. I had a plan to invest for the long term as the market went down, and that's what I did. Since March 2020, US indexes have more than doubled. Staying invested has been transformative to my portfolio and has been very important for my retirement prospects. 

New Concerns

There are many current concerns: elections, geopolitics, US deficit/debt, valuations, etc. It's possible, even probable, that markets get volatile in November.

But do concerns that are already known really translate to market losses? Or are they opportunities, longer term?

Similarly, even unexpected concerns -- black swans -- could be looked at as devastating events or opportunities. It all depends on one's ability to weather the storm and then take advantage of clearer skies.

Of course, now that retirement is in view, losses would be painful. If there were a crash, I am sure that I'd start to question my positioning and even be tempted to rethink my retirement plan.  So the key is just like during the Covid Crash -- I need a plan ahead of time. Or I need to remember the plan that I already made.

What's the Plan, Man?

In my overall portfolio I have index funds in super long term retirement accounts and stock picks in a brokerage account. They've all been doing well. I sold a position recently that just was not moving, but overall I've learned to stick with shares in good companies.

I remember when Trump won in 2016. It felt like the market crashed for one day, and then it rebounded into a strong bull market. It was surprising. It was a lesson. 

I don't know what will happen in the election but I think that if there is volatility, it will probably be a dip to buy.