Investing… To panic or Not to panic? There is no question.

Welcome to January 2022.

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If you’ve been investing in stocks, mutual funds or ETFs in the last couple of years, you’ve done all right. But January 2022 has a few people panicking and to be honest I don’t blame them. I’ve been getting a lot of emails from friends and family asking me about the “crash” that’s going on. My advice is always the same.

First of all I want to say that I also feel stress and anxiety when the market isn’t going my way. But, I also know that it can’t always go my way. I’m not a get rich quick kinda guy. I hold for the long term. That said, here’s what I’ve been telling people the last few weeks.

Most of the people I know have held their portfolio for at least a year and most have been in it for 5 years or more. People calling me are all like… 

“OMG I just lost $5,000.00 on my Costco stocks. Should I sell?”

First thing I say is, “First of all, you only lose money when you lock in your loss by selling your stocks. Otherwise you haven’t lost anything. The reality is the value of your portfolio has decreased by $5,000.00 dollars.”

The second thing I tell them is to look at what has actually happened. Let’s take the Costco stock for example:

One of my friends bought Costco $25,000.00 of Costco stock back in January of 2021, He called me and was asking if he should sell telling me he’s lost thousands of dollars. I told him to look at the big picture.

“You haven’t lost anything… what you’re saying is at one point the stock was at $571.00 and today it’s at $480.00, therefore you lost $90.00 a stock. But that’s not accurate, because you bought the stock the first week of January 2021 at about $350.00, so you’re actually up today over 32%, not including all the dividend payments. That is an insane return on your money. Had you sold when the stock was at its highest you would have had a huge windfall. Remember though you’re in for the long.” In his case another 3 years.

When I’m feeling worried or anxious about the market I open up my budget and look at where I was one, two or three years ago. Let’s see January 1 2019 my portfolio was valued at X is my portfolio worth more today than it was then? If so, I’m ok. And it is. Do I miss the fact that it was up much more for a while? Of course I do. But that’s what the market does.

Warren Buffett believes in the long game. He once said, “If you aren’t willing to own a stock for ten years, don’t think about owning it for ten minutes.”

You have to be patient.

Is it alway going to be rosy? I doubt it. Back in 2008 my entire portfolio was worth around $50,000.00, I lost half of it. Did I panic? Ya! I was working 40 hours a week and thinking about my future. What was I going to do? It took me years to build that.

Well, I calmed down and remembered the words of Warren Buffet who said like, sell when people are happy and buy when people are sad. So, that’s what I did. I went to the payroll office and increased the amount of money I was putting into my RRSP by 25%.

How long did it take me to get back to my $50,000.00? It took about 4 years. But I didn’t lose any money. I stayed in for the long haul.

Now, I have a few friends who are in their mid to late 70’s. In my opinion I think their financial advisor is giving them and has given them bad advice. He’s looking after himself more than he is them.

They are in a good situation, they have no mortgage, they are completely debt free, they are both getting very good pensions and they have about $250,000.00 thousand in the market. But they are also stressed out because of market fluctuations.

I told them that at their age and because they don’t really need their investments to live that they should simply sell 75% of their portfolio and drop into a Tax free savings account. They’re dealing with 5 different banks and investment types. I told them to shut it down and put everything into one bank and cut out a lot of the stress.

Sure you may not make as much money as you would in the market, but you also don’t have time to recoup if things go south. Your investment is more of a life insurance policy at this point. Take the interest and let that add up over the next while. You won’t have to worry about the market or whether to buy and sell. Sometimes a little less money is worth it for the peace of mind it will give you.

So in closing… if you’re young enough to hold, do it. If you’re older and stressing out every time the market moves and it’s causing you to lose sleep… it may be time to sell and enjoy what you have.

Good luck.

Chip and Honey Toodee.

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