I’m always telling my clients to make a plan. Decide which funds to invest in, understand the risks and make it happen. Most importantly, I always advise them to stick to the plan, even when things look like they’re going in the wrong direction.

After all, the best way to lose money on long-term investments is to chop and change. Starting a new plan whenever things look bad is like having no plan at all.

But even as I give that advice, I confess I get itchy hands myself. I’m a professional, I tell myself. Should I be taking a more active role and changing my investment strategy? Trying to time the market, so I can avoid any drops in my balance?

To help me control those urges, I wrote my future self a letter for when investment markets are volatile and my balance is dropping. On the envelope, I wrote “Only open this when you’re 100% sure we need to change our investment plan.”

Here’s the letter I wrote to myself:

Dear Guy,

Things must be rough. I’m sorry to hear that. After all, I said not to open this letter until you’re 100% sure that you want to change the investment strategy we chose.

So I’m going to tell you something that will turn things around. Instead of losing our money, we’re going to make money.

Ready? Here’s what you must do.

Close your laptop. And do nothing.

Stop looking at our fund’s daily figures. Close those Excel sheets. Stop doom-calculating your losses based on whatever’s happened over the last couple of weeks or even months.

In this type of managed investment, you can be sure of one thing: whatever goes down should go back up again, given time.

So time is what we need to invest right now.

This is our long-term strategy for our long-term goals

Do you remember when we sat down and carefully chose this investment strategy? We looked at the charts of its past returns, with a line going steadily up and to the right over many years. There were dips along the way that looked minor.

Well, I’m guessing you’re in one of those dips right now. But it doesn’t feel minor now, right? It feels like a giant pit, getting bigger, and it’s poised to swallow up all our gains, and all of our hopes and dreams.

But don’t try to rescue our money “before we lose even more”.

That’s a classic example of applying short-term thinking to our long-term goal.

Changing strategy now is the worst thing to do. You’ll lock in our losses. Instead of buying low and selling high you’ll be selling at the bottom of the market.

So just breathe. Remember the old saying: When in doubt, zoom out. Look how small this dip is compared to past long-term gains. Be patient. Soon, the funds are going to recover and start rising again. It might not be tomorrow or even next week. But it will. Just like it did after COVID, the global financial crisis, the dot com bubble and the 80s crash. All of those catastrophic drops look like tiny blips now. Just like this one will.

This strategy has a strong track record of going steadily up – over the long term. When you zoom right in and lose that perspective, it feels choppy and volatile.

You know all this. You tell your clients the same thing every day. If you’re still worried, or if things have changed since you set your goal, remember, there are people you can check in with. You work with some amazing advisers – get a second opinion from one of them to make sure your strategy is still the right one for you.

So why did I tell you to wait until you were sure you had to change our investment strategy?

Because when you’re sure things are at their worst, it’s usually a sign they’re going to turn around soon. So you may not have to worry for much longer.

And selling now really could be selling at the bottom of the market. You’re worried about our balance dropping further. Imagine how you’ll feel if you exit just before things start going back up?

You’ve got this

You know our plan. We made it when everything was nice and simple, because it was all theoretical. But remember, we made our plan knowing that we’d see downs as well as ups along the way. Don’t sweat the downs. Acknowledge them, and then put them out of your mind.

We’ll reach our goal, just as we planned – as long as you stick with that plan, even when things get challenging.

Yours with love,

Me

I can’t guarantee that future me will listen to present me. But I hope that the scared, anxious me who’s looking at a bad short-term position will take comfort from remembering the plan we made together, and regain that rational, long-term perspective that’s essential for investment success.

Maybe it could work for you too.

Talk to us

If you’re not sure if your investment strategy is right for you, our team is happy to help. We can talk you through your investment timeframe and check your strategy is right for you. You can chat to us online, drop us an email or call us on 0508 347 437.