Hi there and welcome to October 2015. The leaves are starting to change in our northernmost states as the smell of failure follows me wherever I step. Let me explain.
Through July, the market had treated me so well that, paired with my very aggressive debt repayment this year, I was on pace to see my negative net worth erased by September — months earlier than I had anticipated at the start of 2015!
Of course, if you’ve been following the news, you know what happened to equity markets around the world since July. The Chinese stock market fell spectacularly on fears of economic slowdown — a shock that was transmitted to markets around the world. The Chinese government responded by devaluing the yuan in hopes of reinvigorating the nation’s economic engine — a move which had the added consequence of dampening the prospects of China’s competitors, including the U.S.
The real world
When I started getting serious about paying off my debt and saving toward financial independence, I knew that there would be rough days. I knew I’d have to deal with my own ebbing and flowing motivation for keeping up with the daunting task of erasing hundreds of thousands in debt and building up my non-existent retirement savings.
I also knew that I’d be working in the real world, which meant that no amount of research and planning could insulate me from volatility in my career, among expensive emergencies that might befall me, and in the stock and bond markets where I invested my retirement savings.
Here’s how the mutual funds in my portfolio performed in 2015:
Let’s zoom in on those last couple months:
Why this is OK
I’m definitely saying this through gritted teeth, but I’m OK with this result.
Obviously, it’s no fun to see my net worth standing still for a couple months, but I’m investing for the long term. Knowing that I won’t touch these investments for a long time means that I can allocate my funds very aggressively and that over time, the gains will overwhelmingly outweigh the losses, and tough times such as these will have been totally worth it.
I think that the worst reaction to ugly months such as these would be to withdraw from my strategy of sticking to a low-expense ratio, equity-heavy portfolio that’s diversified internationally and across sectors, and waiting for the long term. So I’m standing put.
And with that, let’s look at the numbers.
Net worth update
Note that the rounding may make some of the numbers not add up. I hope that this isn’t a big deal.
I spent the first 90 percent of this post talking about what’s bad, so this shouldn’t have been a surprise. That my retirement portfolio went down by $100 is bad enough; it gets even worse knowing that I actually made $2,500 in fresh contributions toward my investments and still ended up with that ugly result.
My net worth actually went up this month by $1,100. This is far from my biggest gain ever, but after my first ever net worth drop in last month’s update, I’m happy to be moving in the right direction.
I’d like to set some aggressive goals for this month. More on that in a subsequent post.
So, that’s how September went for me. How did everyone else do?