Spooked by ongoing sharp decline in value of investments - should I cut my losses?

gladiolus

I started investing in early January. So far my only investment has been in a Stocks & Shares ISA. I bought shares in a well-known global index tracker ETF which has been recommended on MSE and elsewhere. I knew at the start that the value of investments can rise and fall, however I have been somewhat alarmed at how swiftly the value of my investment has declined. The value of the investment has dropped by over 3%, and it seems likely that this will continue as the war in the Middle East drags on with no end seemingly in sight.

I am now having significant doubts about whether I have the stoicism or mental resilience to continue investing. Is anyone else in a similar position? I think it's easy for investors with many years of experience, who presumably have accrued substantial returns to make it easier to ride out any dips in the market to say "you have to take the long-term view" (or other similar epithets), but when things go badly almost straight away as a new investor, it can be challenging to deal with. I also wonder if MSE will update their advice on the main site about investments, perhaps altering it to indicate that now is a particularly poor time to invest.

Section62

I also wonder if MSE will update their advice on the main site about investments, perhaps altering it to indicate that now is a particularly poor time to invest.

Personally I'd say now was a better time to invest than this time last month. Whether it is the best time remains to be seen.

The reason why "you have to take the long-term view" is because in terms of investing over the long-term, what currently appears to an event which "drags on with no end seemingly in sight", will probably turn out to be a relatively minor hiccup. (assuming the outcome isn't nuclear armageddon)

Woodstok2000

https://forums.moneysavingexpert.com/discussion/6660472/spooked-by-ongoing-sharp-decline-in-value-of-investments-should-i-cut-my-losses

Prices are lower now than a few weeks ago, so now is a better time to invest.

There was a similar post on here recently from someone who's ISA had essentially not changed in value in 6 months. If you look at any investment fund over a short enough period you will be able to find massive drops, massive gains and everything in between. Over the long term however, the market is likely to outperform any other mechanism for generating returns.

You need to take at least a 5-7 year view, longer if possible. On that scale a 3% dip in 2 months is almost invisible.

jaybeetoo

Stop looking at the value of your ISA! It’s a long term investment (5 years plus). If you sell every time the market goes down and buy when the market has recovered, that’s a sure fire way to lose money. I’ll be investing more come the new tax year. I’ve stayed invested through all the big crashes starting in 1987. So far, they’ve all recovered by leaving my investments alone.

XzavierWalnut

After waiting for several years to get back into the FTSE100, I invested £5k about 5 weeks before Covid hit.
I cannot remember how much it dropped but it was a double digit percentage.
Obviously devastated, I thought in for a penny in for a pound, and put another £5K in.
Sold a few years later with a considerable percentage profit.
In hindsight, I should have been braver, and put more in the second time.
Again, with hindsight, I should have not sold. Think it was around the 8000 point at the time.

PS
Nearly all portfolio investments that I have had over the years went down, but I battled the storm, and came out with a profit.
Only thing I have lost on is AIM shares.

DjangoUnchained

in a similar position in that i started investing in etf just under a year ago, the value swiftly rose and has now swiftly declined, although so far im still ahead of the game. Im not too bothered in fact I,m buying in more and looking forward to the new isa year in three weeks time to bung another 20k in. Im in it for the long term, probably 10-15 years (not too long), i'm 63 years old and have other savings to tide me in for a while.I think you may regret if you sell off now, but what do i know.

Aylesbury_Duck

Whenever I'm tempted to look at the current value of any of my funds when they're declining as they are now, I always 'zoom out'. This month's "alarming drop" becomes a dip in the last six months and is almost invisible several years out.

Albermarle

https://forums.moneysavingexpert.com/discussion/6660472/spooked-by-ongoing-sharp-decline-in-value-of-investments-should-i-cut-my-losses

I am now having significant doubts about whether I have the stoicism or mental resilience to continue investing. Is anyone else in a similar position?

If a 3 % drop spooks you, then you have invested at far above your risk tolerance.

A global index fund could drop ten times that in a proper market crash, and can be a relatively risky/volatile investment unless you keep it for the long term .

 I also wonder if MSE will update their advice on the main site about investments, perhaps altering it to indicate that now is a particularly poor time to invest.

MSE is not in the business of predicting future stock market movements, which is almost impossible anyway.

dunstonh

Spooked by ongoing sharp decline in value of investments - should I cut my losses?

What sharp decline?

 I bought shares in a well-known global index tracker ETF which has been recommended on MSE and elsewhere. 

MSE doesn't make investment recommendations.

 I knew at the start that the value of investments can rise and fall, however I have been somewhat alarmed at how swiftly the value of my investment has declined.

A global index tracker has a worst-case fall of 37% in 12 months. And around 66% peak to trough.

Recent drops have been relatively minor considering events and we are only back to December prices.

The value of the investment has dropped by over 3%

if a minor drop of 3% spooks you, why have you invested in a high risk investment that can lose 66%?

I think it's easy for investors with many years of experience, who presumably have accrued substantial returns to make it easier to ride out any dips in the market to say "you have to take the long-term view" (or other similar epithets), but when things go badly almost straight away as a new investor, it can be challenging to deal with. I also wonder if MSE will update their advice on the main site about investments, perhaps altering it to indicate that now is a particularly poor time to invest.

It certainly gets easier with each negative period. The dot com crash was about 43%. The credit crunch 45%, and the coronavirus 35%. You are worrying about 3%. So, its not really a case of experience or lack of in your case. You are completely out of your depth by the sound of it.

If you are paying monthly, periods like this are great news. Indeed, you would be hoping for another 40% loss to happen.

Cus

https://forums.moneysavingexpert.com/discussion/comment/81929723#Comment_81929723

Why is it a better time to invest now that prices are lower?

kempiejon

I am now having significant doubts about whether I have the stoicism or mental resilience to continue investing. Is anyone else in a similar position? I think it's easy for investors with many years of experience, who presumably…

You should only invest money you can afford to lose, but you knew that? With a global market etf that's pretty unlikely to fall to zero but it will spend time worth less you paid for it. Sometimes much less. I don't check my capital values that often but it'll come as no surprise when I update spreadsheets in early April if it's down on the December valuation I have in the book.

Those investors with many years experience have seen the values down, it wasn't easy at the start. One can only get that experience by holding stocks for many years. Only develop the stoicism and mental resilience to continue investing by having that experience. Either suck it up, hope that this time it's not different and keep plugging away, adding any spare money you can afford to take a risk with in the hope you'll make a few bob and your cash will outstrip inflation but we won't see until the late 2030 or 40s.

Or cut and run. This is not for you. It'll give you an ulcer, sleepless nights and you wont be able to buy things as that money is dwindling.

Up thread someone mentioned Covid-19, my capital fell 40% and my investment income that year halved.