GREAT QUESTION! We are getting calls daily about the stock market, what’s going on with the economy and volatility. It has been a bit of a rollercoaster ride lately and people are worried. Should I stay invested in the market or bail?
Let’s break it down! Each time you make an investment, you buy at the current asking price. Let’s say that when you started investing, you were buying stock in ‘Zebra Shoes’ at $20/ share. Each pay period, you continued purchasing more shares as the price continued to climb. Over the past couple of years, the value of the stock has increased to $30/ share. This is called an ‘unrealized gain’. Your stock investment increased…on paper. If you sold your shares of ‘Zebra Shoes’ at $30/share, it would be actual cash back in your wallet and the increased value would be considered a ‘realized gain’. But for the sake of this discussion, you still own ‘Zebra Shoes’! Lucky you!
In March, the price/ share of ‘Zebra Shoes’ dropped to $10/share. Should you FLY? Or BUY?
If you FLY: You are selling shares that you bought between $20-$30/share for $10/share, locking in a ‘realized loss’- a real money loss. What you originally bought is now worth a LOT less by 50-65% than what you originally paid. OUCH!!
If you BUY: You are purchasing more shares of ‘Zebra Shoes’ at half price! Now you can buy two shares for the cost of one! ‘Zebra Shoes’ loves you. YAY!! When the stock market swings back, you will gain appreciation on the extra shares you have been accumulating.
Be patient. Stay the course. Trust in your process. As the saying goes: Life is short. Buy the Shoes!
Do you want to talk about it? We can help: www.401ktime.com
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