The Market Crashed My Portfolio. 3 Things That Taught Me

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  • It’s safer to invest consistently than to try to time the market.
  • Limit your investments on margin.
  • A long-term mindset keeps you strong during market downturns.

Tapping out was never an option.

When the stock market crashed, it took my portfolio down faster than a heavyweight wrestler. This brutal experience taught me three unforgettable lessons in stock market investing: invest consistently, limit investing on margin, and invest for the long term.

1. Invest consistently

The post-pandemic market plunge took many investors by surprise. It snatched us by our ankles and shook us until our faces turned redder than a bearish stock chart. As everyone and their grandmother lost money, one thing became clear: timing the market is a losing game for many.

When the market fell, I infused a massive chunk of cash into my portfolio. To my horror, my portfolio continued to fall, costing me thousands of dollars in potential gains and wreaking havoc on my mental stability. This led me to make investments that I now regret.

The plunge taught me to invest consistently. Had I tried dollar-cost averaging or laid out a monthly investment strategy, I might have avoided catching the falling knife by the blade.

2. Limit investing on margin

Investing on margin means borrowing money from your broker to buy more stock. If you borrow $10,000 and the stock price goes up by $1,000, your profit is $1,000. If you borrow $10,000 and the stock price falls by $1,000, you owe money to your broker and have to sell off some of your stocks.

As the market fell, I borrowed a significant amount of money -- over 25% of my total portfolio -- to invest on the dip. When the market continued to fall, I didn't have enough cash in my brokerage account to avoid margin calls, so my broker forced me to sell off thousands of dollars worth of stocks I'd planned on holding onto long term. It was a gut-buster of a move, and it hurt me financially.

Being the money equivalent of body-slammed by margin calls taught me to limit my investing on margin. Had I invested less than 10% of my portfolio on margin, I could have easily avoided being forced to sell some of my stocks to repay my loans.

3. Invest for the long term

If there's one thing that kept me breathing through the chokehold anxiety had on me, it's my decision to only invest for the long term. The Motley Fool advises investors to keep their money in the market for three to five years at a minimum. That way, when the market inevitably crashes, investors like me don't panic, forget to breathe, and mash the "sell" button like starved iPhone junkies at a Black Friday sale.

Thanks to my long-term mindset, I remain happily invested in the stock market. And though I emerged bloody and bruised from the capitalist arena, I did so clutching three valuable investment lessons I won't soon forget.

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