What I do when stock prices fall. Things I value after 22 years of investing

Last week, the Nikkei Stock Average fell significantly. The closing price on November 6 was 57,434.77 yen. This is a decline of approximately 9.3% from the end of the previous week.

If you have just started investing, you might have felt anxious after seeing the news about a stock market decline.

“Will it fall even further?”
“Should I sell for now?”
“Was it a mistake to start investing?”

Seeing your own money decrease is something no one likes.

At such times, I would like to introduce my personal rules that I first want to convey to those who are building assets over the long term.

I will share this based on my approximately 22 years of investment experience.

Even if stock prices fall, has the purpose for using the money changed?

To give you the conclusion first, if stock prices fall, I first check the purpose of the investment and the state of my household finances, and if those premises have not changed, I do not panic and trade, but make it a basic rule to watch over it.

There are conditions for that.

・ Long-term
・ Accumulation
・ Diversification

Even if you keep long-term, accumulation, and diversification in mind, you may still feel anxious if prices fall.
At such times, please try to check if you have secured living expenses and money you will use soon, if there is no bias in your investment targets, and if the amount is reasonable.

Please try to remember for a moment. For what purpose did you start investing?

・ For the sake of your children’s future.
・ To support your life in retirement.
・ To have money work for you in addition to you working yourself.

If you started it to prepare for your life 10 or 20 years from now, the purpose itself does not change because of a few days of price declines.

The first thing I want to check, rather than today’s stock price, is “When and for what purpose was this money planned to be used?”.

Of course, if your profession is a day trader and you “need profits daily,” that is a different story, but…

Before you “sell because you are scared,” stop for a moment

When prices are falling, it feels like you would feel relieved if you sold.

However, if you think, ‘I’ll buy it back when things settle down,’ you then have to decide on the timing for buying it back.

If it drops further, you think, ‘I can’t buy yet.’
If it starts to rise, you think, ‘It might drop again.’

In addition to the decision to sell, you also need to make the decision to buy again.

It is not easy to keep making these two decisions while watching short-term price movements.
I am sure it is quite stressful.

Therefore, if you have secured the money you need for daily life and are investing in a diversified manner with an amount that is not burdensome, I want to value not buying or selling just because you are scared.

‘Ignoring’ the daily price movements

I believe that in long-term investing, a sense of distance where you ‘ignore it to some extent’ is also necessary.

・Opening your brokerage account many times every day.
・Searching for crash predictions on social media.
・Changing your investment policy every time your valuation drops.

As a general rule, I only check my account once at the end of the month.
This is because I want to use my time for my daily life rather than chasing daily price movements and predictions.

If you are swayed by every little thing like this every day, you will get tired.

When you cannot help but worry about the market, turn off price notifications. Reduce the frequency with which you check your account. Take a little break from social media.

By doing so, try returning to your work, time with your family, and your daily life.

I value creating a system that allows me to continue without checking every day.

The Financial Services Agency also calls for calm judgment in situations where the market fluctuates significantly, based on the importance of long-term, installment, and diversified investment.

Whether you can watch over it depends on the preparation before investing

However, this does not mean that ‘no matter what you buy, you should just leave it alone forever.’

This discussion assumes that you are investing in a widely diversified manner with money that you will not use for a long period of time.

I want to confirm the following three points.

・Have you secured your immediate living expenses and education funds that will be needed soon?
・Are you not concentrating your money in a single company or a specific sector?
・Is the amount within a range that will not affect your life even if the price drops?

You cannot simply “ignore” situations where an individual company’s management deteriorates or if you are investing with borrowed money.

Also, if your household finances change due to unemployment or illness, you will need to review your investment amount.

Keep your distance from price movements.
Completely separate your household finances (living expenses) from your investments.

Think about these two things as a set before you invest.

If you make the mistake of investing your living expenses in pursuit of a quick fortune, a price drop will directly impact your daily life.

Do not force yourself to buy more just because it has become cheaper

When prices fall, you will hear people say, “Now is the chance!”
While there is some truth to that, I do not recommend it for beginners.

There is a possibility that prices will fall even further.
Your fear and stress may increase.

Beginners should be as careful about rushing to buy more as they are about rushing to sell.

If you have decided on a monthly investment amount that you can comfortably afford, first check that plan and continue steadily and patiently.
Investing your living expenses or education funds just because prices have dropped carries the risk that you will not have the money you need when you need it.

Fixed-amount investing has the feature of allowing you to buy more units for the same amount of money when prices are low.
Therefore, if you continue your regular fixed-amount investment as before, you will receive the benefits of the price drop to some extent.

However, this does not guarantee a profit.

In conclusion

When the market falls, you feel like you have to do something.

But in long-term asset formation, checking your plan and watching over it without changing anything is also a sound decision.

What I absolutely want to protect is not changing how you use your money or your investment rules out of anxiety.
I believe you do not need to make hasty decisions while you are feeling anxious.

My investment goals, the time frame for using the funds, and my household financial situation have not changed. I have diversified my portfolio, and the amounts are within my means.

Once you have confirmed that, close your account for today and return to your normal life.

I have continued to invest while maintaining that sense of distance all along.

If you are having trouble with your life plan, please send me a message here👇