Your short term money should not be in the stock market. Why would long term investors be scared of a drop in stock prices when in reality stocks are just on sale? In fact, I might even put more money in the stock market if it drops 50% in a short period of time. Whenever stocks drop I look at it as an opportunity to buy more shares on sale because in the long run, stocks have always recovered.
While no one can predict the future, history has shown that whenever stock prices as a investment class go down, they eventually recover over time.ĭue to the fact I’m a long term investor, I have options short term investors don’t. I’m a long term investor and my retirement is decades away. What the stock market does in the short run is irrelevant. If you do this, then short term stock drops won’t matter.
You should have your investment portfolio set up so that you won’t likely experience losses that go beyond the pain point that would make you deviate from your investment strategy.
If you only had 10% of your portfolio in stocks, your total portfolio would only go down 5%. However, if you had 100% of your portfolio in stocks, your total portfolio would drop by the whole 50%. Think of it this way, if you had only 50% of your portfolio in stocks and stocks went down 50%, your total portfolio would only go down 25% if nothing else changed. Account icon An icon in the shape of a person's head and shoulders.
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