A Few Reminders To Myself When Investing In Uncertain Times

Over the past several years, my portfolio has grown considerably through a combination of good returns plus regular savings and contributions. These days, I’m comfortably in the Coast FI stage of my financial independence journey, where my portfolio is large enough that it should grow enough to cover my expenses at traditional retirement age, even if I don’t save another penny again (note that while I am at Coast FI, I’m still saving and investing – but being at Coast FI puts a lot less pressure on our household when it comes to saving and investing).

Having a large portfolio is undoubtedly a great thing, but it does create some surprising mental considerations that I never thought about when I was working with far less money. As a bit of background, I started my investing journey about 10 years ago. Those ten years have seen a big upward trend in the market, but it did come with some periods of volatility and flat growth. We had a bit of a flattening right around when I started investing, then that big pandemic drop in 2020, and then some periods of flat growth in 2022 and 2023. From the looks of it, we might be entering another dip (or worse).

We all know that investing is about thinking long-term and staying the course. When I started investing, my portfolio was small, and even when things got a bit volatile at the beginning of my investing journey, it didn’t feel like that big of a deal. Things went up and down, but the money I was working with wasn’t that much in the grand scheme of things. But I’ve noticed now that as my portfolio has grown, these natural market fluctuations can look and feel a lot worse to me. And that forces me to have to really remind myself what investing is all about.

The Problem With A Larger Portfolio

Much of investing is a mental thing- where you have to either stop looking at your numbers all the time or be comfortable when you see things drop. I try not to actively check my investments all the time, but I have my investment accounts logged into the financial tracking app I use, so inevitably, I do see the market fluctuations that happen with my investments (I use a paid app called Monarch, which is what I switched to after Mint shut down). From a mental point of view, I’m always telling myself that I’ve picked a reasonable asset allocation, that I don’t need the money now, and that I believe that the market will go up over the long term. 

But I’m also human, and seeing the value of my investments drop does hurt. Interestingly, as my portfolio has gotten larger, seeing my portfolio drop seems to hurt even more. With less money, the drops can be severe, but from an absolute number perspective, it never felt like that much. But I’ve noticed that as my portfolio has gotten bigger, some of these market drops can be huge from a pure numbers standpoint. Whenever the next big market correction happens, my portfolio could drop by six figures. People with really huge portfolios can see even larger drops from a pure numbers standpoint. No matter who are you, that can be hard to stomach.

So, with all the uncertainty out there about what’s happening with the market, I’m writing this post as a reminder to myself about what this investing thing is all about.

Five Things To Remind Myself About My Investments

1. I Don’t Need This Money Soon

Perhaps the most important thing I remind myself of when the market starts to get choppy is that I do not need this money anytime soon. I’m not on the early retirement path at the moment – these days, the plan is to go the traditional route, which means I’m likely not going to need any of this money for two decades or more.

Since I don’t need this money anytime soon, worrying about market fluctuations or second-guessing my asset allocation isn’t helpful. All the money in my investment accounts – gains or losses – is only on paper. That’s not to say market fluctuations don’t have a meaningful impact on my real life. The stock market often correlates with the general health of the economy, so if the market drops, it’ll likely impact my income too. But income and the health of the economy is something separate from my investments.

All this to say, it’s one thing if I needed this money soon – in that situation, I’d rightfully be worried about what the market is doing. But with literally decades of investing time left before I even need to think about this money, there’s really no use fretting about things now.

2. My Investments Are Good Enough

One of the most important concepts to understand about investing is that what you’re invested in doesn’t have to be perfect – it only needs to be good enough. It’d be great if we could make a perfect portfolio of investments, but unless you can see the future, there’s no way anyone can know which portfolio is going to be the perfect one.

That being said, go to any investing forum and you’re going to see people arguing about all sorts of minutiae of what makes a good portfolio. It’s fine to argue about what you think is better, but I think that people often lose the point when they do this – that even if your portfolio isn’t the “perfect” one, assuming you’ve picked a good enough portfolio, you’ll probably be fine too. 

What exactly makes a portfolio good enough? Good enough means your investments are reasonable and will likely get you to the finish line (in this case, the finish line means financial independence). It doesn’t mean you’ve picked the best portfolio possible. It could even be the worst portfolio when compared to other good enough portfolios. But as long as it gets you to where you need to be, that’s all you need.

I’m currently doing the JL Collins route of 100% in VTSAX in my Vanguard accounts and similar Total US Stock Market Index funds with my non-Vanguard accounts (specifically, with my Fidelity Solo 401k and Fidelity HSA, I’m invested in FSKAX and FZROX respectively). I chose this allocation because it was the simplest one when I first started investing and the arguments behind it made sense to me. I’ve seen tons of things saying that having an international allocation will do better and that it’s the safer bet in the long run. That very well may be true, but no one really knows.

At a minimum though, I am fairly certain that going with a Total US Stock Market Index Fund, even if not the best choice, is likely going to be good enough. And that’s all I need.

3. My Contributions Help Steady Any Downturns

The nice thing about long-term investing is that, so long as you stay the course, you’ll keep investing through all the ups and downs of the market. We often think of investing as a beginning number that moves up and down, but in fact, there are two things in play when you invest. There’s the value of your investments thanks to market movements, but there’s also the value of your investments through your contributions.

There’s a big psychological benefit here that often gets overlooked when you’re still in the investing stage of your wealth-building life. That’s that even if things take a dip, so long as we continue to invest, those dips won’t feel as bad. This is especially true if you’re someone who is saving aggressively because even if your investment account value drops, you’re still building it up with your contributions. Depending on how big your portfolio is, you might even replace all of your losses with your contributions.

This is exactly what happened in the early days of my investing life. I started investing in a sort of flat period in the stock market. And while it didn’t feel great to see my investment return staying flat (and being negative at some points), the actual pain wasn’t so bad because I was continuing to put more money into my account each month. As a result, I never really felt like my investments had dipped much because any losses were always being replaced by new contributions.

With a larger portfolio, it’s a bit harder to replace any huge losses, but even so, I’m continuing to save fairly large amounts, which means any drops in the market are slightly softened with continued contributions (one downside though is that because I’m self-employed, I do my contributions once per year, so I do feel the dips in the market a bit more than when I had a traditional job where I was investing with each paycheck). 

4. I’m Dollar Cost Averaging By Necessity

This brings me to another point about investing over long periods. There’s often a fear that we’ll invest at the top of the market and then instantly see our investments crash the next day. There’s no doubt seeing this happen might crush your spirits and cause you to panic. This is why one recommendation to help steady this fear is to dollar cost average your investments. This is where, rather than investing your money all at once, you spread out your investments over a period of time. The idea is that by dollar-cost-averaging, you’ll limit the blow of any dips since you’re going to be investing at different times. Sometimes you’ll be buying when prices are high. Other times, you’ll buy when prices are low.

Here’s something to realize – almost all of us dollar cost average simply out of necessity because very few of us suddenly have large sums of money to invest all at once. If you have a regular job, you’re likely investing every few weeks as you receive your paychecks. Even if you’re self-employed like me, you’re probably making new contributions at least once per year.

From a practical standpoint, what this means is that I know I’ll never make my investments only at the worst time. There will be times when I’m investing at better or worse points. But I’ll never only invest at the top or bottom of the market. 

5. I’ve Gone Through Bad Periods Before

A final thing to note is that, while I have only been investing for about a decade, I have been through bad market periods in my life, and so far, things have always seemed to bounce back.

I graduated college in 2009, right in the middle of the financial crisis. Of all the years you could graduate college in this century, 2009 was probably the very worst year. I couldn’t get a job and ended up moving back home and getting a minimum-wage job. And yet, despite all that, I survived and am doing very well today. While I wasn’t invested in the market at this time due to a lack of money and financial knowledge, I sure felt the impact of the financial crisis. 

In March 2020, we had a global pandemic that we hadn’t seen in a century. For a brief few months, VTSAX and other broad-market index funds dropped by over 25%. it was short-lived thankfully, but this was a period where it felt like the world was coming to an end. And yet, once again, we bounced back. Some people probably panicked and sold or adjusted their portfolios. I did not and kept on going. 

And we’ve had some flat periods over the past 10 years too – periods where people felt like a recession was probably coming and that the market couldn’t keep going up. Through it all, I’ve been able to stay the course.

I don’t know if I’ll panic if we get another financial crisis. Maybe we won’t get another one like what happened in 2008 and 2009. Maybe we will. But I do take comfort in knowing that I’ve been through some downturns and a massive global pandemic – and I still was able to stay the course.

Final Thoughts

Times are very uncertain right now. And whenever things take a big dip, it’s going to hurt to see my portfolio value drop by five or six figures. Some of you reading this might be in a similar position to me.

Remember that so long as you’ve picked a good enough portfolio allocation, don’t need the money anytime soon, and can mentally keep yourself from panicking, you’ll likely be fine. That’s something I have to keep reminding myself all the time.