When I logged on to my investments one morning and looked at my Roth IRA, I noticed that in the past day alone the value of my investment had dropped 1.15%. A similar change had occurred on my wife’s account, which had a loss of 1.16%. The reason for these losses was obvious; the financial news for the past week has been completely focused on how poorly the stock market has been doing this year. Nearly half of the stocks in the S&P 500 had gone down at least 20% below their 52-week highs, creating fears of a new bear market. A bear market occurs when the price of securities are falling, which leads to widespread fear in investors and results in a dramatic selloff of stocks. Stock values then plummet as a result.
While it is stressful to see yourself losing money, I had a hard time not seeing the benefit. Having only recently gotten involved in the markets, my starting investments were in stock mutual funds. Those funds were heavily diversified both in the companies they purchase stock from and the industries they invest in. I feel that this a benefit to me as an investor because it means that it’s very difficult to lose my shares in the fund unless all of the stocks in the fund lose their value or the fund company goes out of business. In other words, it would be hard for my investment to vanish, but the current trends in the market may have given me an opportunity.
Since I didn’t feel threatened by the idea of losing my shares, I tried to benefit from the smaller cost of purchasing more. To that end, I maintained the monthly purchases I had set up for my funds. The long-term hope was that not giving in to fear would mean taking advantage of the cheaper shares each month, and when the market rebounds I will have purchased into several undervalued funds that will lead to a healthy profit.