Which is more important; the number of shares or the value of the shares? Ultimately, most everyone would agree it is the value of the shares that means the most and I would agree, but during difficult markets focusing more on the number of shares you own can help you manage your emotions.
It is easy to feel defeated or anxious when you look at your portfolio and it is less than it was. A few months in a row of this exercise and your mind can really begin to focus on the lower values and the thoughts of self-preservation can begin to creep in. Fear is a perfectly normal emotion and when we are fearful the perfectly normal reaction is to back away from whatever is creating the fear. If I’m hiking in the woods and run across a dangerous snake, you’d better believe I’ll be backing away.
As investors, it pays to manage that fear when it comes to your investments. We all know that you don’t want to sell your investments when they are a lower value; rather we want to sell them when their value is the highest. The old adage of “buy low and sell high” seems simple and is great recipe for making money as an investor. One method of managing that fear is to zero in on the number of shares you own. While those shares may be less valuable right now, you still own just as many shares as you did 3, 6, or 12 months ago. If fact, there is a really good chance you own more shares. Many investors allow the dividends and interest on their investments to reinvest and purchase more shares.
The reinvestments of dividends and interest is a true silver lining in difficult markets. While that share value may be less, your dividends are buying a larger quantity than they did when the share value was more. Accumulating additional shares puts your portfolio in a position to really rebound when the markets do improve and the share value goes up again. For those working, this concept of buying more while things are priced lower holds true in your 401(k), IRAs, and other investment accounts too.
Focusing on the fact that you own just as many or even more securities than you did when prices were better, may just be the thought that delivers you to a time when those prices are better again!
We hope that you find this week’s Weekly Market Review both interesting and informative. Have a great week!
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Trevor N. Coe, CFP®
TREVOR'S WEEKLY MARKET REVIEW
July 27, 2022|