With arguably one of the most important elections of our lifetime going on right now, as I type this, what have you done with your money to prepare?
It really doesn’t matter who wins or loses this election, it will be tumultuous either way. I know some want candidate X to win or maybe you’re a proponent for candidate Y. That’s awesome. You should be excited to do your patriotic duty and get out and vote, or not get out and still vote by mail. Hopefully by now everyone has because as I type this, it’s too late.
Where’s your money?
I have money in an investment fund. I get it through my 9 to 5 and it’s a really good plan. In my case, there are no fees but I’m limited on the quantity of moves I can make in and out of funds per month. Admittedly, I’m not swimming in shares/money in these accounts. Truth is, that I have successfully raped and pillaged these accounts my whole career. Always citing that, “I have plenty of time left”.
Added to that, my finances have never been that great where I could put the max into that account every paycheck. I would make sure that I put in the amount that my employer would match. After all, its free money, but that was mostly all I could afford to sock away. Still, I have a healthy nest egg put aside for my impending retirement, it’s just not as good as it should be.
The sky is falling!
The stock market is a REALLY big rollercoaster, especially this year, 2020. The Rona has everything turned upside down. Small businesses are struggling. People are at odds with their government and each other about how it is being handled. Face masks are the norm, but not for the reasons that you would think. People are eating outdoors in 110-degree heat just to be able to eat at a restaurant. Toilet paper is once again in short supply, as is bottled water. Which is weird because I don’t think people realize that if they run out of bottled water, you can refill your bottles at your kitchen faucet.
If you’re like me, every penny that you have saved is precious. Especially if you are anywhere as close to retirement as I am. My first instinct is to pull my money out of the volatile/risky funds and put it in some boring safe fund so that it remains in tact during these troubled times. I struggle with this on the daily and admittedly, I have made that move many more times than I should have.
Here’s why I made that mistake.
I looked at my investments as money. Crazy, huh? Money, sheesh, what a Financial Moron. Ya big dummy. Easy enough to do really. After all, that is what you see when you look at your funds. That is what you look for. So naturally, you consider your investments “money”.
If it’s not money, then what is it?
It’s shares. You used the money to buy shares. You own X number of shares. These shares are worth X amount of money each, and you have a total of XX shares, therefore your investments are worth XXX amount of money.
Why is this important to know?
Mainly because I never knew it. Maybe someone explained it to me way back when, but I never grasped the concept, until recently. I honestly wish I had figured it out sooner. Maybe I wouldn’t have made such moronic moves. Then where would we be? I would have to call myself “Financial Genius”, and who would really want to read my crap then?
If you own a share, it doesn’t matter that the value drops for things like elections or pandemics. I mean, it could if you were hoping to sell that share soon, but if you were in the race for the long(er) term, chances are the value of that share will come back up eventually. This is the case with our current situation, pandemic/election. Prior to the Rona, stocks were soaring. Money was being made and the value of shares was climbing. As you put money into your investment account, you were buying more shares. The better the market was doing, the more you were paying for each share, so the less shares you were buying for a given amount of money.
Enter Covid-19.
The virus is bad enough. It effects the lungs in such a way that it makes influenza look like a good time. The only thing that took off and went viral faster (see what I did there?) and stronger than the Rona itself, was the social media hype surrounding it.
When I say “hype”, don’t get me wrong. I know the Rona is a serious issue and must be handled with every precaution that we can throw at it. But you have to admit, people have gone bonkers over this and the Covid Extremists are out in full force. They play on both sides too. You have the ones in the masks, with a face shield and rubber gloves giving dirty looks to the folks running around with no masks like they are the naked guy running across the soccer field. Then you have that same no mask guy posting all over social media bragging about his no mask journeys into pro mask habitats, and the subsequent dirty looks and actual pursuits by masked people. Craziness.
Where was I?
Oh yeah, stock shares. So, you own these shares of stocks and where I used to make my mistake was in that I thought that as the dollar value went down, so did the number of shares that I owned. To the point that possibly, I could end up so bad that I lost all of my shares/money. That is not the case. If you own 100 shares that cost $1.00 each today, and the market drops 40% tomorrow, you now own 100 shares that are worth $.60 each, but they are still 100 shares.
The only people that get hurt on a roller coaster, are the ones that got off in the middle.
Where this becomes a huge factor is when the share value is low and you are able to buy more shares of that fund. Remember buy low, sell high? When the market is low, you should be putting more money into it, not taking it out. This is where you can make big money upon the regain in value of the share. This “strategy” is even riskier in Mutual Funds that usually make up a retirement portfolio because there is a 24 hour turn around before the funds get moved by your command. So “timing the market” is almost impossible with any accuracy. Mutual Fund are more for long term than “playing the market”, so you should use them accordingly.
“Don’t play politics with your portfolio”
A very good friend of mine told this to me recently. He is far from the Financial Moron that I am. Which is why I take his advice, and you should too. This is why, for the most part, you are better off just setting your investments and forgetting about them. Let it ride, as they say. I can’t tell you how many times I have solidified a loss by pulling my money out after the fall. I did it for what I thought were the right reasons, but they weren’t, and I shouldn’t have. Duh, Financial Moron
….and now you know why.
Dave