My investments right now are a sea of red

31 January 2019

I have to take a deep breath before I check their performance online and peer through my fingers at them as I do when watching an Agatha Christie murder mystery (that’s about as scary as my TV viewing gets).

When my investments were going up, I patted myself on the back for artfully picking ones with such potential. Now as most slide back down again I’m not feeling so clever.

But I suspect neither their rise nor fall has much to do with me – most investors will have seen similar movements over the past year.

The FTSE 100 – an index of the biggest 100 companies on the London Stock Exchange – saw its biggest fall in a decade last year. It was pretty hard to make money investing in 2018 – and I certainly didn’t. Similarly, when my portfolio was doing so well the year before, so were most.

In theory, I should be quite pleased about the recent drops. I haven’t actually lost money because I haven’t cashed in my investments. Plus , now, comparatively, I’m buying on the cheap.

I have a small direct debit buying the same few funds every month. Now I’m getting much more for my money than I was a few months ago. And there’s nothing like a bargain.

I know my falls can be steep because my investing strategy is high risk. I’ve decided to take higher risks in the hope of higher returns – and I hope that will pay off in the long run.

I also know I’m still fairly near the beginning of my investing journey, so I hope to have decades to ride out the rises and falls and make back any losses. When I edge closer to retirement, I’ll switch to more conservative funds so I’m more sheltered from these extremes.

These are the arguments that I tell myself when my investments are down. Nonetheless, it’s still unpalatable.

It’s dispiriting seeing all the minus signs against my investment returns and the red numbers everywhere.

“I pay much less for my funds than I did a few months ago”

When something I bought at full price later goes on sale, I may think ‘oh good, now I can buy a second one for cheaper’, but it still stings that I paid more for the first than if I’d waited.

I just have to stomach the drops and stay on the rollercoaster.

There was a furore a couple of years ago when it was discovered that the government pension provider, Nest, was investing young workers’ pension contributions in cautious funds.

After all, this goes against the conventional strategy of taking more investment risk when you’re younger.

But Nest decided that if people putting money into a pension for the first time suddenly saw it drop in value, they might be put off and stop making contributions altogether. Slightly lower returns seemed a small sacrifice for not risking people opting out.

So how do you reconcile wanting higher returns that rarely come without taking risk with the discomfort when your investments inevitably fall from time to time?

Well, there is the Nest option: invest more cautiously. There is the seasoned Agatha Christie watcher option: develop a stronger stomach.

And there is my peer-between-your-fingers option – or simply look at your investments less often.

Investing is for the long term – years, decades, not months. For anything shorter, a savings account is probably a better option. Checking regularly isn’t always necessary – especially if it’s likely to put you off.

You can’t ignore them completely, and it’s a good idea to rebalance your portfolio every few months or year. Otherwise, if risky assets have increased in value and cautious ones have stayed the same, the proportion of risky assets will grow and you will be even more exposed next time there is a downturn.

I’m hoping if I check on mine every few months rather than every few days, I’ll be met with a lovely sea of green and upward arrows next time.