This post is part of the “Step-by-Step Guide to (Passive) Military Investing” series:
- Maximize your TSP matching
- Eliminate your consumer debts
- Start investing small (1%)
- Buy investments
- Increase your monthly contributions
- Diversify
- Keep buying and holding… don’t panic sell!
This is perhaps the most important step of all. At this point, you are investing a significant part of your income, and building a nice diversified nest egg for retirement. However, it is inevitable that there will be a bad day in the stock market. Or, a major event will happen (like market crash in 2020) and sink the stock market for months.
Listen to me. Do not panic sell.
The smart play is to invest the same amount of money as the market goes down. Each dollar will buy more stocks. When the market is down, stocks go on sale. Keep to your regular pattern of investing and holding. This will give you the benefits of dollar-cost averaging, which is an investing principle where you buying a stock at all different price points, which reduces your risk of losses over the long term. When buying total market index funds or bond funds, you are betting that the U.S. stock market will continue to increase in value over the long term. As this pattern has held for 100+ years, it is about as safe of a bet as there can be in finance.
So, don’t panic. Don’t sell. Continue to invest in your future and you’ll weather the ups and downs of the market.
Return to the Step-by-Step Guide to (Passive) Military Investing” series