It's fair to say that 2022 has been a trying year for investors. And while the broad market has yet to officially enter bear market territory, my brokerage account balance is down about 25% year to date.
To put it another way, the losses I've seen in my portfolio exceed those of the general market. That's due largely to the heavy concentration of tech stocks in my portfolio -- a risk I knew I was taking when I loaded up on those stocks back in the day.
Despite the fact that a 25% portfolio drop is quite significant, I'm not panicking over it. Here's why.
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1. The market could come back up
This isn't the first time stock values have plunged broadly since I started investing. And it's certainly not the first time I've seen the value of my personal holdings tank.
But one thing I've learned is that the stock market has a long history of rebounding. So if I simply leave my portfolio untouched, I might manage to ride out this unpleasant wave without losing so much as a dime.
2. I'm not planning to tap my portfolio for years
The money I have in my brokerage account isn't money I plan to use in the near term. Rather, it's money I have set aside for retirement and other far-off plans. Because that milestone is decades away, I don't have to concern myself with the stock market's near-term performance.
3. I don't need to liquidate my stocks for cash
There's a reason I make it a point to keep about a year's worth of cash in my savings account -- you never know when the need for money might arise. At this point, there are talks of the U.S. economy entering recession territory, and that's not a good thing. But I also know that I have a fair amount of money in the bank to get through a period of reduced earnings should that unwanted scenario come to be.
Because my emergency fund is so healthy, barring a catastrophe, I shouldn't have to raid my brokerage account to cover expenses anytime soon. As such, I can leave my portfolio alone, sit back, and wait for it to recover.
4. I can take losses strategically
Some of the stocks I own aren't down too much, and even with them being down, I'm still sitting on significant gains from when I bought them. The one reason I'd hesitate to cash out those gains is that I don't want a huge tax bill on my hands. But since many of my investments have lost value, I do have the option to take a loss and use it to offset gains.
Try not to panic
It's a very difficult time to be invested in the stock market -- there's no question about it. But if you stay the course and don't make any rash decisions in your portfolio, like dumping your stocks out of fear, then there's a good chance you'll come through this trying period financially unscathed.
