The stock market is freaking killing me!
I’ve been a risky investor for as long as I’ve had money, and it has always seemed to work out for me. That is, until the last few months.
I had some bad performance on a few things over the summer. I understand the market goes up and down, and I typically don’t mind the lows because I know I can just keep buying in cheaper. However, when the stock market assaults my portfolio so viciously like it did this month, it makes me want to give up on investing altogether.
Here’s the damage:
I lost over $6,500 in one month!
My 401k took a huge nosedive. My regular investment accounts tanked. My Roth IRA dropped. In fact, my liquid accounts increased by over $1,100 this past month, which means I lost over $7,500 in investment value. I like to consider myself a tough guy, but I think I want to cry a little bit.
Boo hoo.
The Plan of Action
I can’t lose this much money without identifying a root cause and making some changes right? Actually, no. I’m not going to change a thing.
Some of the investment losses were options that have essentially gone to zero. I’ll be looking to unload them whenever there’s even a small market rally to try to get something out of them, but these can’t go any lower; they are pretty much zero right now.
My 401k could probably use some tweaking, which I’m happy to do after some kind of recovery. However, I know for a fact that buying high and selling low is a bad strategy for making money. I’m going to keep buying low while I have the opportunity right now, and when my investments come back up a bit, I will look into diversifying and getting into some less volatile funds.
As far as the rest of my finances are concerned, I’m doing pretty well. I’m not spending too much and all my budget categories are still looking pretty solid. I’m going to keep plugging away at adding money to a savings account, and eventually plan to pay off some student loans with that money.
Economics and Politics are IMPORTANT
You might be wondering why I would pay off student loans when one of my most popular articles is about making minimum student loan payments so you can invest the extra money.
The only problem is I need a strong economy and real market growth for that to work. Right now, I don’t trust the Obama administration to provide an environment where jobs and businesses can thrive. Without a solid economy, the stock market won’t be heading up any time soon.
The failed policies of this current government caused me to lose $6k in my investments. None of the companies or funds I invest in suffered through a scandal this month. Nobody reported bad earnings. The businesses are just doing the best they can in this economy, which is not very well thanks to our government.
Of course I own my investments and could have pulled them out of the market, so the ultimate blame is on my shoulders for not selling earlier and having a risky portfolio. I’m not blaming the government for my investment decisions; only for their failed policies that have unemployment increasing and the economy stagnant.
I’ve been looking for an opportunity to share this music video for weeks, and now seems like as good a time as any. Here is a rather long but highly informative music video about the difference between Keynesian economics (essentially textbook Obamanomics) and Austrian economics (think Reagan as a starting point, but then remove more federal involvement).
Watching this video over the last few weeks has been the best 10 minutes of my August. It’s a sad and lonely existence, but it’s the only one I’ve got.
Kevin McKee is an entrepreneur, IT guru, and personal finance leader. In addition to his writing, Kevin is the head of IT at Buildingstars, Co-Founder of Padmission, and organizer of Laravel STL. He is also the creator of www.contributetoopensource.com. When he’s not working, Kevin enjoys podcasting about movies and spending time with his wife and four children.
I think it is a smart idea to pay off the loans first. In this economy, there is no high chance of a great return. I am sure that the interest on your student loans is higher than you would get in a return from your investments. Keep at it and it’s always nice to remember that the market always rebounds.
In this economy, that’s my goal. I just need to keep saving cash to do it.
Good idea on not chanigng direction mid-stream when it comes to your investing strategy. The market right now is completely lost, with 2% gains followed by 4% losses followed by…who knows. Europe seems to be the driving force for the uncertainty, but I don’t think now is the time to panic.
Yep, like I said in the post, no one makes money from buying high and selling low. I might change up my future contributions a little, but I’m not selling anything until it hits a price point that I’m comfortable with.
Excellent music vid. B-)
TMG
I’ve watched it probably 30 times.
Ach, this sucks! Hopefully everything rebounds soon. This is totally why I am the least risky investor ever. I know that in the longterm, it’s smarter to take risks, and yield rewards, and just ride out these tough times, etc. etc., but man, I don’t know if I could handle seeing my net worth take a dip like that!
I’d definitely be crying. For sure.
I’m actually not really upset about it at all. Most of the money I lost is in retirement accounts that I won’t touch for decades. Since I know I’m not spending it soon, it doesn’t bother me all that much to go through these kind of dips.
it’s great to see that you took the time to debrief on what happened in Aug – i think by the virtue of you doing that, taking stock of what’s going on and then making the necessary decisions going forward, you’ve already a winner for August, regardless of what those numbers are telling you!
I think Europe — not Obama — is the cause of the current uncertainty. There are some great Planet Money podcasts explaining how troubling Europe’s position is right now — long story short, it’s freaking’ awful over on the other side of the Atlantic.
That said, the best thing you can do right now is #1: Buy low! Stocks are on sale, and you’re young — we have 40 years to recover!! and #2: Pay off debt.
Sorry that the market is getting you. I try not to let it rattle me too much. Instead I use put options to protect most of my capital. I have a lot of cash since many of my put options got exercised in August. Since then, it has been two steps forward and two steps back every other day for my stocks. Oh well.
On more than a few occasions in August and September I have made or lost between $1000 and $1500 a day. Its not bothering me. I’ll be buying all the way down. Dividends and royalties are where its at right now, but the bulls will be back… they will be back.
Don’t give up Kevin. Eventually the current administration will be out, hopefully by 2112. If not, we are in for a long ride down.
Holy Blue Light Special Batman….This is a buying opportunity!