Stay the course - it sounds so simple. Keep moving forward and trust in the process. Focus ahead, watch your step, and whatever you do - don't stop and don't turn around now.
The reality is, this is difficult. When faced with uncertainty and situations that make us a bit uncomfortable, we want to take action. We want to "fix it," address the uncertainty, and move forward.
A recent article I read on CNBC's website did an excellent job of describing the challenges of staying the course when it comes to investing & down markets. As described by a director of personal finances (Tim Maurer), there are four-steps to evaluate as you consider whether to stay invested during a market decline which are all a trade-off of pleasure and pain:
- The pain of staying invested is that I could lose even more.
- The pleasure of moving to cash is that my worry is eliminated and I'm guaranteed not to lose any more.
- The pain involved in moving to cash is that I'll miss the upside, thereby eliminating my opportunity to recoup recent losses in the next market up move.
- The pleasure in staying invested is that I'm giving myself a better chance to achieve my financial goals in the long term — the reason I invested in the market in the first place.
The simplicity and clarity of this process really struck a chord with me. The bottom line is that for most of us, the pleasure of remaining in the market and achieving our goals in the long-term should be our focal point. Any short-term pleasure of removing all risk will only be replaced with pain of not meeting our goals or missing the rebound. (If you don't think missing a few days of rebound matter, think again. See this chart from Blackrock. )
Bottom line - we know it's difficult. But if it was easy, there would be no reward. There would be no long-term growth of capital. Everyone would do it. You are among the brave few who are on a course towards your goals. Stay patient and stay on the path. Your future self will thank you.