If you are a newbie investor or experienced investor, and if you invest in the US market (or other markets like Vietnam), chances are you are seeing your portfolio take a big hit in the last few weeks.

I am too.

All of my hard-earned money is there in the investment account plummetted in some days.

Admittedly that is not an easy feeling for anyone. Sometimes it also feels painful. Like physically painful

But I didn’t panic or go all the way to pull money out? Why?

Lesson from the past

Because in 2020, I learned a lesson the hard way. Right when the pandemic started, I panicked. I withdrew my investment because the future seemed so bleak and I just needed to feel safe with my money hiding somewhere safe (not under my pillow of course lol)

So I did it. I was nervous, which my current self do not blame my past self. I was inexperienced. I was alone here in Canada and I needed some peace of mind to continue to live my life.

But that action alone cost me some real money. Hard-earned money. When I was feeling brave enough the get back into the game, the market was already covered and on the rise.

I suffered twice: realizing the material loss, and failing to get back in time and bought the stock when the prices are high (too high that when those stocks went down, I made some losses again).

However, this experience is invaluable. I learned not to act on emotion, especially when it comes to investment.

What I learnt from investment jouney

In a nutshell, the most challenging game in the investing journey is how to stay cool and act against our emotions, our psychology.

Warren Buffett has a famous saying:

Be fearful when others are greedy, and greedy when others are fearful.

Warrent Buffett

That sounds too simple, yet very difficult to implement.

Once we are in panic mode, our instinct is screaming to control of the situation. It urges us to take action to stop the situation, in this crashing market, it demands us to stop “the bleeding”. “get back when it is safe”

But that could be the worst decision you want to do with yourself.

Mr Market is irrational, and often crazy. If we plan our future based on Mr Market day to day behaviors, we would be likely set ourselves to failure.

Mr Market has another endearing characteristic: he doesn’t mind being ignored. If his quotation is uninteresting to you today, he will be back with a new one tomorow. Transcations are strictly at your option. Under this conditions, the more manic-depressive his behaviour, the better for you

Warrent buffet

Even though they are skilled investment professionals, they fail at the job. Read this report: According to a 2020 report, over a 15-year period, nearly 90% of actively managed investment funds failed to beat the market.

Pause for a moment and let it sink in…

Do you really think in the long run you can sustainably beat the market by timing the marketing, buy low and sell high?

I would add a disclaimer here: outside in the financial world, there are excellent fund managers who can excel and beat the market. But those people are rare like gems. It is estimated that 80% of hedge fund managers fail to beat the market.

Another Path I intentionally choose

I choose another path. The path that has been well proven and has made thousands of people to reach their goals: financial independence.

I am ok with the assumption that I am not going to beat the market. I am more than ok to earn an average of 8-10% every year and let the compounded interest rate do its magic.

“All the time and effort that people devote to picking the right fund, the hot hand, the great manager, have in most cases led to no advantage. Unless you were fortunate enough to pick one of the few funds that consistently beat the averages, your research came to naught. Thereʹs something to be said for the dartboard method of investing: buy the whole dartboard.”

Peter Lynch, Legendary Manager of Fidelity Magellan

What to do when the market is volatile

1- Stay put. Do not sell anything. Let the market run it course

Since I do not use margin, I am 100% comfortable when the market went down as I know ultimately it will go up. I will not be forced to sell my position for a margin call. My ungreediness has paid off in this volatile time. I become smarter thanks to the mistake I made in the past.

Another important rule in investing is: DO NOT LOSE MONEY.

Why?

Because it takes a long while to cover it once you lose it. So, once you sell your position when the market is down, you effectively lose money.

2- Remind myself of why I started investing

Whenever I open the app and see the “red” numbers, my heart sinks a bit. Yet I often ask myself this:

-Why am I in the game? What is my long-term goal?

-Am I in it for the short term or the long term? How is this going to affect my goal? (probably not)

Also, I know that my portfolio is widely diversified ( I still have a portion in stock but overall it’s very diversified) . I hedge it via diversification so the odds are in my favor.

Another important rule in investing is: DO NOT LOSE MONEY.

Why?

Because it takes a long while to cover it once you lose it. So, once you sell your position when the market is down, you effectively lose money.

3- Surround myself with financial advices from podcasts or like mind bloggers

I learnt a great deal every day from listening to daily podcast and following Key bloggers who achieved their financial dependence, who have been through this journey. They know the pain, yet they are the greatest inspiration to motivate me. This is not the time when I should focus on the negative news as I know media likes to attract your attention by spelling out the worst possible scenarios. I refuse to be manipulated.

From research and books, I learn that the market is panicking yet after a big dip will come after a big recovery. If we stay put patiently, we will be there to capture the gain. Just missing one or two days of big recovery can hurt our portfolio performance

Timing the market is impossible. Don’t fool yourself into thinking that you can use the charts to time the market in and out. If so, traders and technical analyst would become millionaires long before

Also, you would want to remember: The volatility is the “fee” that investors should expect to pay. If you think it’s punishment, it will hurt you psychologically, but if you accept it’s a kind of fee, you will make peace with the market swing.

4- Buy some more

I know this advice is not for everyone. But that’s what I did (which is a big jump from where I was 2 years ago). I’ll buy more for my TSFA account as soon as I have a new room for 2022. I see this as an opportunity to buy stocks at a discount price (this has taken years to develop this mindset for me personally).

I hope that you would react wisely and won’t regret because you act out of fear and anxiety in your investment journey.

Let me know what do you do when the market fluctuates? What are your investment strategies?