What a crappy time to have started investing in the stock market

I know, I know you’re not supposed to check on your long term investments, but where’s the fun in that? I started investing money in the stock market (outside of my Roth IRA) last October, primarily in an index fund that tracks the S&P 500, but also in a bond market index, and as of May, an international large cap index. Since last October the market has only descended, almost 17% so far, which makes the numbers in my brokerage account all red and unhappy.

SWPIX performance from October 2007 to June 2008

Thanks to bimonthly dollar-cost averaging, I haven’t lost that much. Overall I’m “only” down about 5% which is unsettling when compared to the 2.01% I’m getting on my checking account. But at the same time I’ll admit it’s pretty cool, because it’s like my money takes on a life of its own. It’s much more dynamic than money just percolating in a savings account. Even though my investments are a small drop in the global pool of money, it’s neat to think they’re indirectly making it possible for businesses here and abroad to do their thing.

Thursday, June 26, 2008 8:44pm
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4 comments

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C
6/27/08 9:36am

I admit to knowing basically nothing about the stock-market and I have this feeling that I should want to know because if I ever hope to retire, I might need to actually invest in something other than things I can buy at Crate & Barrel. Hopefully things bounce back soon and you will be swimming in money!

justin
6/27/08 11:30am

Hopefully some day I’ll be swimming in the Mediterranean sea!

But honestly, the best place to start, and probably the best thing you can do for yourself is set up an IRA. The government limits how much you can put in it every year to $5000, which some people say is not enough, but $5000/12 = $416.66 a month, with is a lot of money to part with for most people. Depending on how much you make, you can even deduct that money from your taxes.

Then once the money is in your IRA, you can do stuff with it. You can by a mutual fund, preferably an index fund that tracks a major market. And then you just let it sit there. I’ve got mine set up at Schwab to transfer money from my checking account and automatically purchase index fund shares the next day.

Patrick
6/27/08 1:31pm

Correction, what an awesome time to be BUYING stock!! Buy low sell high amigo, Ride that wave!

justin
6/27/08 2:49pm

Ha, well, yes, I should have clarified, now is a “great” time to start, last October was crappy.