Watching your new worth decline isn’t fun. But when investing over the long term you will have some good periods and some bad periods. Diversification can help smooth out the extremes but the markets are often driven by emotion. And those emotions (greed, fear…) cause extreme price swings. I am getting ready to invest more in the market. I don’t know how much further we will go down, or if we are at the bottom now (unlikely). But there are investments I am happy to own at these prices. The main reason I don’t buy more is the limitation of my capital. And I would rather buy in slowly so if prices decline I can get more for my money.
Not surprisingly the stocks I am looking at are those in the 12 stocks for 10 years portfolio. I am looking at buying more Templeton Dragon Fund, Toyota and Google for myself now. I am happy to be able to buy more of these stocks for the long term. It is not fun to see my net asset value decrease but that does provide some opportunities for buying stocks at lower prices. They may turn out to be bargains, or maybe they will drop much further. That only time will tell, but I am happy to add to those positions at these prices.
On the overall market I am waiting and watching. But I am leaning now toward moving more of my long term investing into stocks – I am already over-weighted there compared to the conventional wisdom but that is my style. I am willing to take more risk with a long long term investment portfolio. As the time frame shrinks (and the assets grow) I believe in reducing the risk profile for the overall portfolio (though I still believe conventional wisdom over-emphasizes price volatility risk (compared to inflation risk, for example). This market does have real potential for creating serious long term problems, which is why I need to think more (and get more information) about the long term implications.