Tuesday, June 14, 2016

Can a drop in the stock market be good?

Here's a tricky question for you.

When is a drop in the stock market a good thing?

Answer: When you are about to invest in it. (Or if you have short sold stock I suppose)

I wanted to write this post really quick because i check the stock market several times each day and need this reminder right now as well. For the past few months I've been watching the market grow pretty steadily. Last week the S&P 500, which is the index that I track to, hit an all time high. But over the past few days it had been going back down pretty fast (.5%-1.5% each day). Since I don't plan on touching my investments for a very long time I can handle a volatile market and not worry about my future holdings too much. But sometimes it is still a little hard to see your net worth drop by $1,000 each day for a few days in a row even though you haven’t spent any money in that time.

Yes, I am OCD like that and check my net worth every morning.

Even knowing that the market is going to come back up, just like it always has, it always feels counterintuitive to see the dropping stock prices and not see it as a bad thing. So at times like this I have to find tricks to convince myself that the red numbers are actually a good thing.

What’s The Silver Lining?

I’m writing this on the 14th, which means that tomorrow my 401(k) contributions will be put into the market. We get paid every two weeks but the 401(k) portion is only invested for us on the 15th and 30th of each month. This means that it sits in a holding account during the mean time, it drives me nuts that that is how they do it but I just have to go with it. So, right now I have just over $1,000 (2 contributions) sitting in a holding account waiting to get invested tomorrow at whatever price the markets close at on the 15th.

It’s probably not going to make much of a difference in the long run. Maybe I’ll get an extra .1 shares out of this sale but at least it's something. This is why that little voice in the back of my head keeps hoping that the markets will continue to drop today and tomorrow. Then shoot back up on the 16th right ;-). 

Remember to look for the good in the world.