Has the market correction since February kept you up at night for the past few months? After investing in a bull market for such a long time, some of us may have already forgotten what a bear market looks like.
You had two choices. Either sell off your stocks, realise your losses and hoard cash, or stay invested and hang on through the rollercoaster ride.
Did you choose to fight or flight?
I know of many people who chose the other option of liquidating their portfolio and hoard cash till the market starts recovering. That's when they will go all in to invest when the market is near its lowest.
But do we know when Mr Market is going to recover?
I'm an amateur when it comes to analysing and timing the market. I neither had the time, nor the skills to do a good job.
During this Covid-19 market correction, I chose to stay invested and just like what I have been doing for the past few years, continue to invest a fixed sum of money every month once I receive my pay check.
Staying invested isn't easy too.
Choosing to dollar cost average downwards during a market correction requires a lot more discipline and courage, compared to dollar cost averaging in a bull market. But it helps that I am investing in a diversified portfolio across the globe instead of individual stocks.
Seeing the light at the end of the tunnel, maybe?
I can't say with absolute certainty that the market correction is officially over and everything's going up and up from here onwards. No, I didn't manage to get that magic crystal ball on Taobao.
As of 28 May 2020, my 80/20 portfolio with AutoWealth has recovered from its all-time low and is reporting a 3.99% gain in time-weighted annualised returns.
Even if we're not at the end of the bear market yet, the chart above shows that every portfolio has its ups and downs. As long as we stay on track and do not deviate from the path we have set for ourselves, I'm sure that our investment portfolios will return to a long term uptrend eventually.
My challenge to you, should you choose to accept
I didn't write this article to tell you that staying invested during market corrections is the right move for everyone. If you believe in selling off your portfolio and buying back when everything is cheaper, just make sure you are consistent about that and take action when you think it's the right time.
Your investment journey is different from everyone else because you designed your investment philosophy based on your current circumstances and your life goals.
What I would like you to challenge you to do is to create your investment philosophy (if you have not already done so), start your investment journey and avoid deviating from your investment philosophy.
Staying consistent with your investment philosophy over a long period of time can be very challenging.
For me, I found that the easiest way for me to stay consistent in my investment journey was by automating my investment process. I use AutoWealth and Endowus to help me achieve a 'set-and-forget' automation process to continue funding my investments so I can focus on the other important aspects of life.
What works for me may not necessarily work for you so you will have to find your own path.