It’s fair to say that 2022 has been a trying year for investors. And while the broad market has yet to officially enter bear market territory, my brokerage account balance is down about 25% year-to-date.
In other words, the losses I have seen in my portfolio exceed those of the general market. This is largely due to the high concentration of tech stocks in my portfolio – a risk I knew I was taking when I loaded these stocks at the time.
Despite the fact that a 25% portfolio drop is quite significant, I’m not panicking about it. Here’s why.
1. The market could go up
This is not the first time that stock values have fallen since I started investing. And it’s certainly not the first time I’ve seen the value of my personal tank.
But one thing I’ve learned is that the stock market has a long history of rebounding. So if I just leave my wallet intact, I might manage to ride out this nasty wave without losing a penny.
2. I don’t plan to mine my wallet for years
The money I have in my brokerage account is not money I intend to use in the short term. Rather, it is money that I have set aside for retirement and other distant plans. Because this milestone is decades away, I don’t have to worry about the short-term performance of the stock market.
3. I don’t need to liquidate my shares for cash
There’s a reason I make it a point to keep around a year’s worth of cash in my savings account – you never know when the need for the cash might arise. At this point, we’re talking about the US economy entering recession territory, and that’s not a good thing. But I also know that I have a good amount of money in the bank to weather a period of reduced income should this undesirable scenario occur.
Because my emergency fund is so healthy, barring a disaster, I shouldn’t have to raid my brokerage account to cover expenses anytime soon. As such, I can leave my wallet alone, sit back, and wait for it to recover.
4. I can take losses strategically
Some of the stocks I own aren’t down too much, and even though they are down, I’m still sitting on big gains since I bought them. The only reason I would hesitate to cash out these winnings is because I don’t want to have a huge tax bill on my hands. But since many of my investments have lost value, I have the option of taking a loss and using it to offset the gains.
Try not to panic
It’s a very difficult time to invest in the stock market – there’s no doubt about it. But if you stay the course and don’t make any rash decisions in your portfolio, like throwing away your stocks out of fear, chances are you’ll come through this tough time financially unscathed.