Investing in a time of volatility

A couple of little price falls, and everyone loses their minds

I am on holiday and neglecting RetireJapan, so of course stock markets around the world decide to melt down while I am away.

I’m sure everyone knows the basics, but it is good to have frequent reminders hence this short post.

Investments can go up and down in value. This is called volatility. Stocks are pretty volatile investments. It is normal for prices to increase or decrease.

Over the long term stocks tend to go up, so if you are investing for decades you shouldn’t worry about these short-term price movements.

In fact, if you are buying investments now, you should be happy to see price falls. Things are now on sale at a discount.

For most people, keeping track of stock prices and making decisions to buy or sell is stressful and time-consuming. It also doesn’t help, as many people will be tempted to buy and sell, usually at the wrong time.

If you are living off your investments already or close to doing so, you will probably want to have at least some of your money in cash or bonds rather than just stocks. This can help you get through market corrections or crashes without having to sell too many of your investments at a loss.

But for everyone else, volatility and price drops are a good thing. Enjoy the bargain prices and don’t give it too much thought.

Ten years (ten months?) down the line you won’t even remember what the market was doing today.