Replace Fear And Greed With Patience And Discipline

The market of 2011 has been very volatile. January and February were up. March went down and back up. April continued up and then May and June went back down. July jumped up and now August has basically crashed.

My fear looks at the turmoil in the market and it wants me to pull my money out. My greed looks at the crazy swings and it wants me to take risks that are beyond my understanding.

It seems like the market crash in 2008 was driven down a lot by fear. As the market kept going down more people got scared and jumped ship causing it to go down more. From February 29, 2008 to February 27, 2009 the S&P 500 was down over 49%.

I started seeing articles online saying things like:
“The days of buy-and-hold are gone!”
“The markets are too crazy now!”
“You can’t just let your investments sit!”

Then from March 13, 2009 to March 12, 2010 the S&P 500 was up over 68%. A lot a investors started jumping back into the market. Many recognized that the down turn went too far.

Discipline and Patience Must Replace Fear and Greed

With my real money accounts I have let them ride. I am blessed to have a long time before I plan to retire. I am pleased to say that buy-and-hold is still alive and well.

I have two accounts. One is a Roth IRA that I contributed some to when I did not have access to a 401k. The newer account is the 401k at my current employer.

The Roth IRA account was down more than 50% in late 2008. By late 2010 it was back to even. With all the turmoil of recent days it is back down slightly. Sure, if I could have timed the drops and the bounces back I would have been a lot better off, but I am not that smart at this point. I am pleased that the account has recovered so well.

My 401k is much different. With that account I make regular contributions with every paycheck. This meant that even though the market was going down for all of 2008, I was buying more shares twice a month. As of late 2010 I was well up from where I was at the start of 2008. Dollar-cost-averaging really works!

The lesson I have learned from the 2008 recession is to have discipline and patience. A long term perspective is best when it comes to investing. There will be down turns, even bad ones, but if you have discipline and patience the market bounces back.

2 Timothy 1:7 (NLT) says, “For God has not given us a spirit of fear and timidity, but of power, love, and self-discipline.” Self control is a fruit of the Spirit. We must allow this to influence our investing.

This is even more difficult for me with my inMessment Game Portfolio. As of August 26, 2011 I am down about 5% in this game. This is harder for me because I feel the eyes of those who follow

During the down turns in July and August I have gone all in to the market in my inMessment Game Portfolio. I have basically no cash holding at this point. Now I must use discipline and patience. My goal it to share the journey of long-term investing.

This and other articles on this blog are for entertainment purposes. I am doing the best I can but I am still very much in a learning process. These posts are an effort to share this learning process only and should not be considered financial advice.

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