Some of you may have noticed the share market getting a bit more attention than normal in the media. Since we started Sharesies, the market has generally been gaining value. Today, that turned around, and the share market lost some value.
This means that if you’re investing through Sharesies, some of your investments may have lost value—and probably for the first time! Here’s a couple of tips to help you keep your nerves.
Think about the long-term
Investments losing value can be a bit nerve-wracking but try not to panic. You still own the same number of investments, it’s the value of these that changes (and is expected to change) over time. Think of how long you’re looking to invest (your investment horizon). If your timeframe is far away, then short-term changes aren’t that important. Because you’re not going to spend the money for ages anyway, it’s okay if it dips in value a bit between now and then.
On the other hand, selling your shares when they dip in value turns a ‘paper loss’ into a real loss. If your investments lost value, and you sell today, then you’ll have less actual money in your pocket than when you started investing. That’s a real impact, and it’s one we’d like you to avoid!
You should also look at long-term trends. We’re fresh out of crystal balls (again), so we don’t know how long this dip will last, or how far it will go. But we do know that the overall share market tends to rise in value over a long enough time frame. Take a look at this graph of the US500 over the last year (one of the Smartshares funds you can invest in through Sharesies):
As you can see, there’s lots of dips in there, but the long-term trend is upwards. So if your time frame is long, buckle in and enjoy the rollercoaster!
It’s a buyer’s market
Also, remember that you still have the same amount of shares. It’s just that each one is worth a bit less. The silver lining here is that they’re also cheaper if you want to buy shares. This is where dollar-cost averaging really comes in.
Let’s run through a quick example. Say you decide to spend $10 a week on shares. Shares are worth $10 in your first week, so you only get 1 share.
Then imagine there’s a dip in value in the second week, and shares fall to $1 each! That’s not great for your first share, but it means your next $10 investment buys you 10 shares, when your last investment only bought 1.
So, if you combine your one share from the first week with your 10 shares from the second week, you have a total of 11 shares, and you’ve spent $20. 11 shares for $20 is a bit over $1.80 a share. This mean that if your shares rise in value to $2 each, you’ve made money. Your first share may have lost value, but the next 10 picked up the slack.
So if you really want to make the most of a nervy situation, just keep on investing through Sharesies. Remember to think of your time horizon, and don’t invest any money that you need in the near future, but if you have a long-term time horizon, just keep on investing—little amounts, every week, week after week.
Ok, now for the legal bit.
Investing involves risk, including the potential loss of principal. The info provided above isn’t a recommendation to buy, sell or hold any financial products available through the Sharesies platform. Before investing, consider your investment objectives and read the fund’s product disclosure statement carefully. It contains the fund’s investment objectives, risks, charges and other information which should be considered carefully before investing.