It would be more than fair to say that the first six and a half months of 2022 haven't been pretty from an investor's perspective. Not only are major indexes down, but the tech sector has been hit notably hard since the start of the year.
As such, many investors are sitting on big losses in their portfolio. I should know -- I'm one of them.
When I last checked my portfolio, I saw that it was down about 30% year to date. And while that was jarring, I'm trying to put things in perspective.
Stocks have taken a beating before and recovered smoothly. And so if I sit tight and wait out this downturn, I may not actually lose a dime in the course of the current downturn -- especially since I plan to hold my stocks until retirement rolls around.
Image source: Getty Images.
In fact, not only am I not selling off stocks right now, but I'm actually buying more. Here's why.
A prime opportunity
A lot of people I know are sitting out the market right now and waiting for things to improve. But I refuse to sit on the sidelines at a time when so many quality stocks can be purchased on the relative cheap.
A number of stocks that I once found too expensive are now trading at what I consider reasonable levels. Those are companies I'm trying to scoop up.
Plus, the reality is that a lot of the stocks I own that are down didn't necessarily underperform on their own. Rather, their value is down as a result of a broader trend. But those are still businesses I believe in, and so it makes sense to keep putting money into them, especially at a time when shares are available at a discount.
Furthermore, I know that I'm not planning to retire for many more years. If I buy stocks now, they'll have many years to gain value for me.
What about recession fears?
Some of the people I know are hoarding cash right now in case a recession hits -- something many financial experts say we should brace for within the next year. But thankfully, I don't have to sock away tons of cash for a recession because I already have a well-funded savings account with money earmarked for emergency situations like job or income loss.
And also, frankly, I live below my means so that I can absorb a hit to my income. Of course, a total loss of my income would constitute a huge financial blow. But if my income were to drop 25% during a recession as a result of not being able to command as much work, I'd be OK.
That's why I feel comfortable putting money into stocks right now. If you don't have adequate cash reserves for emergency purposes, then boosting your savings should definitely take priority. But if you're all set in that regard, then it pays to take advantage of buying opportunities while stocks are down.
The idea of investing at a time when stocks are in a slump may be nerve-wracking. But if you're working with money you don't expect to need for a long time, you should feel better about the idea of scooping up stocks at a time when they're less expensive than they've been in years.
