Don’t Panic!

Oh, it’s so annoying to watch the stock market tanking and being unable to take advantage of it even a little bit. In my working days, with a hefty lump of my salary being sunk into the markets on a monthly basis (“pound cost averaging”, don’tcha know?) I could watch the FTSE and feel good either way it went. If it was heading up, yahoo, I was checking my funds’ growth almost every day. On the slide, I didn’t quite check so much, but told myself that my monthly deposit would buy me more units for growth in the long run.

Of course, “In the long run, we’re all deid”, and you can’t take it with you. Retirement then, becomes the time that you put the investment brakes on, tally up, and start to spend the units accumulated so far. Or at least that’s how it is for me. At the moment, I’ve nothing coming in and everything going out. The bucket is leaking from the bottom and I’m pouring nothing in at the top. And by God it’s scary when the markets start to turn against you and the bucket not only leaks, it shrinks. All the planning to calculate and decide what your annual budget is to live nicely this year, only to discover that the pot funding it has suddenly reduced by a breathtaking amount (for me, that’s anything above about five grand, by the way.) “It’ll come back”, you tell yourself. But when? And will it?

I’ve talked before about the shock of going from a relatively intense working life to the complete opposite in retirement and how it’s quite a difficult change to come to terms with. It’s the same with saving and investing. I made regular monthly investments into the markets for over twenty years. Once my income stopped, so did my deposits. Overnight, I changed from being a committed saver to becoming an enforced spender. I don’t even want to discuss the monthly swing I’ve experienced between having a salary coming in to cover the expenses going out. Suffice to say it’s a lot, and every month at the moment I’m finding the well is running dry faster than I thought it would. In my head, I know the markets will bounce back (at least I think I know) but I still watch the numbers with more trepidation than I’ve ever done. The voice of Corporal Jones resonates in my head, “Don’t panic, Mr Mainwaring! Don’t Panic!!” (It’s just occurred to me that Mr Mainwaring was a banker! Spooky, eh?)

What to do then? Simple. Get a frigging job. Stem the financial bleeding. I don’t like lying in my bed at three in the morning worrying about money. I didn’t like lying in my bed at three in the morning worrying about work either, but at least then once I’d stuffed my face with a hearty breakfast I could head out into the world and earn some coin. I could actively try and do something about the situation I faced. Now I just fret. I don’t like this retirement passivity one bit. What am I doing about this lack of income? Hoovering? Cooking dinner? Reading books? Going for a walk and breathing the fresh air? What, while the air is acrid with the smoke of burning markets?! Not good enough, I’m afraid.

I’ve jotted on this blog before that unless you’ve millions in the bank, you’ll never really stop worrying about money. I also know, however, that even multi-millionaires fret over losing it all and maybe it’s one of the reasons why many of them are still working long after many people would think that such people have amassed enough to never have to work again. Of course, loads of folk work for more than just money and I’d certainly have included myself in that camp. But it’s almost impossible to separate the two worlds of work and money, in the same way that you mix different ingredients to make a cake but can’t then un-mix them. Especially if you’ve already an interest in building your reserves, as most of us here do, because the fastest way of increasing your income is to work. This fact becomes underlined in bold when the markets start to go against you.

What we all want is certainty, but we’re terminally uncertain that this state will ever arrive. This time it’s the fear of Brexit that’s pushed the market under 6,000 points. Last week it had gone up to 6,300 and I thought about converting some of my investments into cash until the Brexit turbulence was over. And then I heard a financial analyst maintain on TV that the market had already priced in all the uncertainty, so don’t worry. When will I ever learn that the smartest analyst out there is Betfair, and even they can get it wrong? Nevertheless, this was enough to remind me that my investment strategy nine times out of ten is “Do Nothing”, so maybe the guy did me a favour after all, because he made me pause for thought and thus I left my investments sitting as they are. Markets, do your worst, while I try to think of some other strategy that will enable me to take advantage of the uncertainty instead of it taking advantage of me.

 

9 thoughts on “Don’t Panic!

  1. The galling thing about brexit uncertainty is its a voluntary train wreck. The hit to my finances now is just a precursor to the deep damage a Leave vote would do. I don’t have a single friend, across the political spectrum, who is a Leaver, so very clearly Them who are doing the damage

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  2. Have you considered going on holiday for a bit? Say a few months somewhere exciting. May take your mind off things and help you change down a gear or two. Go somewhere a little bit tough, get out of the old comfort zone – could work wonders.

    ‘Don’t panic’ should only ever be used as a reference to Douglas Adams.

    Everyone should take a leaf out of Monty Brewsters book for the EU ref and vote for ‘none of the above’. I am starting to get pretty strongly convinced that the only sensible thing to do is abstain.

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  3. Consider studying Zen Buddhism as one of your retirement pastime, or at least enough to understand the issue of attachment which is also identified in psychology though the Zen version is more poetic. You are attached to symbols that served you well in earlier times. But you are not who you were, you are both more in some ways and less in others. To grow, to become more tahn you were, at some times you must let go, life has it’s systole and diastole.

    You identified the problem correctly in others

    I’ve jotted on this blog before that unless you’ve millions in the bank, you’ll never really stop worrying about money. I also know, however, that even multi-millionaires fret over losing it all and maybe it’s one of the reasons why many of them are still working long after many people would think that such people have amassed enough to never have to work again.

    Physician, heal thyself 😉

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  4. I am puzzled. If your are retired, why are you worrying about the stock market? These moves are not large. Why don’t you just take your dividends and interest and ignore it all? (Or is the piece a spoof and I am missing it?)

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    • I think it’s fairly well explained in the article: Jim’s retirement is funded by his investments, probably based on some variation of the 4% rule.
      The 4% rule is a rule of thumbs, not a guarantee. So, even though “historical statistics” tell us that if you have 25 times your yearly expenses in investments, “you’ll be fine”, it’s pretty easy to look at your stash going down significantly, and fearing that the rule won’t work for you anymore.

      dividends + interest are not enough for the 4% rule to work. There are cases where one has to eat on the capital, and assume that the capital will go up again soon. Hence the fear.

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  5. If you can live off your portfolio income and/or you have a cash reserve to draw on then you don’t need to sell any investments when their prices are reduced. You have more time to study movements in the markets but it is probably better to do something else instead.

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