On the first of each month, I update the “Investment Portfolio” tab of one of my financial planning spreadsheets.
I don’t monitor the value of my investments on a daily basis, but I listen to the business report on the news often enough to know that things weren’t pretty in October. So when I logged into my investment accounts on November 1st, I was prepared for the fact that I was likely to be disappointed with what the numbers had to say.
Sure enough, I was right…and then some.
To digress for a moment, I’ll note that with the theme of this blog revolving around frugality, it should come as no surprise that FM and I both fall into the category of risk-averse when it comes to our saving and investing.
While taking on more risk with our investment comes with the potential for greater returns, it’s a gamble we’re not overly willing to take since there’s also has a greater chance our money could be gone all together. Potentially getting nothing out of our money isn’t exactly making the most of it.
FM and I save for retirement independently of one-another, so we each have our own approaches that we employ.
FM has opted for an ultra-conservative, but sure-to-generate-income approach of laddering Guaranteed Investment Certificates (GICs).
While I’m also fairly risk averse, I take a slightly less certain route and employ a strategy modeled after what I discovered years ago through the Canadian Couch Potato blog by utilizing a combination of Tangerine Investment Funds.
I follow a similar approach to managing the kids’ RESP account, using Questrade to build a portfolio of ETFs.
Getting back to the original point of this post, it turns out that October 2018 marked the worst single month for my retirement investment accounts – both in terms of a percentage loss and actual dollar amount – since I started investing and tracking on a regular basis at the beginning of 2015. Same goes for the kids’ RESP, though on a much smaller scale because we haven’t been invested as long and the portfolio has limited exposure to the stock market.
Based on FM’s risk tolerance, it probably goes without saying that when I told her how much the value of my investments had decreased in a single month, she was shocked. When she realized that I wasn’t even concerned about it, she appeared to be dumbfounded.
How could I possibly be so calm about seeing a significant amount of money (significant in our world at least) disappear?
It’s for the same reason that Ramit Sethi – one of a handful of personal finance writers I read on a regular basis – wasn’t particularly worried about his portfolio losing $75,000 in a matter of just 12 days.
While the impact to my portfolio wasn’t nearly as dramatic as it was on Ramit’s, my reaction was exactly the same as his: ‘keep calm and
drink coffee carry on’.
10 years ago, my reaction may not have been so subdued. Back then I wouldn’t have been aware of what are now pretty basic investing principles to me. Losing any amount of money would have given me indigestion.
But years of reading and research have taught me that market downturns are an absolute certainty. I know that I’m going to see plenty more months like this between now and whenever it is that we reach our goal of financial independence. It’s not a matter of if, but when we see another recession.
That same reading and research has allowed me to be comfortable in feeling that things are likely to work out just fine in the long-run.
Accepting these facts has allowed me to remove any emotional reaction to the market’s ebbs, flows, and inevitable cycles. It has also allowed me to view months like October as great buying opportunities because I can get more shares for that regular amount of money I’m investing.
The reality is that my oldest child is still more than 15-years away from needing to access the RESP funds. I’m 20-years away from my loose target of financial independence by the time I turn 55.
Both of those things are a very long time away.
So my approach to just stick to the script and keep doing what I’ve always done with my investments: put things on auto-pilot by investing a regular amount of money at regular intervals in a small number of funds, reinvesting the distributions and dividends back into those same funds, and letting the market and time do their thing.
After all, it’s not about timing the market. It’s about time in the market. And as a fairly new parent, time is on my side.
Until next week, thanks for reading!