Last week was a slightly anxious one for me, and probably for anyone else who has money in the stock market. Although I work at 22seven and have invested through 22seven, I’m not a finance-head; I probably understand as much (or little) as the average investor about what happens in the finance world, and why. So I don’t know what the reasons or percentages are, but I know that, about a week ago, the value of my unit trusts dropped quite a lot quite fast.
I also know that the dust settled some and that my investments made up quite a lot of ground a few days later. And I know that, like ups, downs will happen again, uncomfortable though they may be.
So what am I going to do about it? Nothing.
I’m going to carry on exactly as I am and leave my money invested for as long as I possibly can.
Did I worry last week? Yes. Did I check the value of my investment and see that it had gone down? Yes. And did I think, for a fleeting moment, about taking the money out? Yes. But I also did something else, and that was to read a few articles by people who know more about investing than I do. And those articles had a few interesting insights and common denominators that put things into perspective for me.
The summary is more or less this:
- There will always be ups and downs. It helps to know going in that this is normal, and to be expected.
- Ups behave differently to downs. Markets tend to go up more gently, and for longer. Downs tend to be sudden and extreme. (This must be a bit like surfing: you ride the wave for a minute, but a wipe out only takes a second.)
- We react differently to ups and downs. This sounds obvious, but the explanation helps: because the ups are gradual, we get used to them and don’t feel them as much (“Come on in, the water’s fine”). The downs are less predictable and more intense, so we react emotionally and, perhaps, with panic (“Holy crap, is that a shark?”).
- Historically, there’s more up. Companies have to say that the past is no indicator of the future, because there is no guarantee. But, on the whole, stock markets have gone up over time.
That last point is probably the most important one. My investment, like most unit trusts and lots of other investments in the stock market, isn’t meant for a quick buck. It’s intended as a long-term thing, and the longer I leave it, the more I stand to gain. Luckily, as The Rolling Stones said, time is on my side.
If you’re interested in doing some of the reading I did, check these pieces out. They definitely seem to represent the prevailing common wisdom. And I even understood most of what they said.