So it finally had to end. A stock market that has been roaring since March 2009 has finally entered a ‘correction’ stage. And for many robo-investors, this will be your first time watching your fund graph dip lower today than it did a week ago. All across media, I see the same question, should I cut my losses or stick to the plan. Thankfully, for most, this answer is fairly simple.
It’s tough to avoid human psychology. “I put my money into my robo advisor religiously. I tracked it weekly. The graph went up consistently. I even calculated how much I might make at the end of my investment phase. After this week, I’m an absolute glass half empty person at this moment in time.” And if you are due to cash out now or retire, you would be right to be on the side of pessimism.
However, most of us are not there. Most of us have many years of investment left and for those people, corrections like this are not as terrible as they may seem. The good people over at Time Money expressed this better than I, but let me give you a quick summary. After a drop in the market, any money invested today will go further than it would a week ago. That $1 of investment will own slightly more stocks than last week. So if you are investing long term, these shorter-term dips mean less than you feel it does today.
Ok, some optimism returning! Does this mean I should buy more as they may be undervalued? That question I cannot tell you. You are the only person who can decide if you have enough disposable income to invest more – although on paper, your investment should go further today than it will last week. However, the key to this investing game is to remember what we spoke about back when we introduced Wisebanyan to you, don’t try and time the market. Keep your eyes on the long-term prize – your financial goals. That will give you the best chance of success.
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