This One Decision Could Make You Feel Better About Losses in Your Brokerage Account

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  • Many people are seeing losses in their brokerage accounts this year.
  • Changing the way you think about investing could soften the blow.

It's an important conclusion to reach.

Have you lost money in your brokerage account this year, at least on screen? I sure have.

The last time I checked, my portfolio was down about 30% since the start of the year. Now, part of that is due to a broad stock market downturn. But another part is that I decided to put a decent chunk of money into tech stocks and, well, it backfired -- at least temporarily.

You might think I'd be sitting here panicking over a drop that substantial. But in reality, I've managed to keep my cool in spite of the unfavorable stock market conditions we've been grappling with since the start of the year.

In fact, this isn't the first time I've seen losses in my investment portfolio, and I'm sure it won't be the last. But a while back, I made one big decision with regard to my investments. And it's made it so I'm able to cope with setbacks like a 30% drop in my portfolio more easily.

Think long term

Some people who invest in a brokerage account do so in the hopes of growing wealth for different near-term goals -- things like buying a home, or even having more money to spend on vacations. But if you take a short-term approach to investing, you might end up stressed, disappointed, and out a lot of money should market conditions change for the worse.

That's why I think a better bet is to make the decision that you won't be touching the money in your brokerage account for many years. If you adopt the mindset that this isn't near-term cash you can access, you may find that market downturns are a lot easier to cope with.

For me, the money I have in my brokerage account is all earmarked for retirement. In fact, I'd never put money I'm reserving for a short-term goal, like a vacation, into a brokerage account, because there's always the potential to lose a chunk of that principal due to circumstances outside my control.

Because I know I'm not planning to cash out my stocks for decades, I'm not so stressed about the fact that my portfolio was down about 30% for the year the last time I checked it. Instead, my plan is to sit back, do nothing, and hope that the value of my portfolio comes back up over time.

Now that might take two years, five years, or 10 -- there's no way for me to know. But because I'm not looking to tap my brokerage account anytime soon, I don't have to actively worry about what my balance looks like.

Know when to keep your money in the bank

As a general rule, you should really only invest money in a brokerage account that you don't think you'll need for seven to 10 years or more. If you expect to need your cash sooner, put it into a savings account. You'll lose out on the potential to generate the higher returns a stock portfolio is capable of. But you'll get peace of mind knowing your money is there for you exactly when you want and need it.

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