If there’s one thing the ups and downs of the financial market in the last few months have taught me, it’s to think differently about investing. Like many, I often think about my small retirement portfolio in terms of money. I know how much money went in, so I feel like I should have $X. But that’s not true, of course.
What I really own is X shares in an index fund.
Unless I’m planning to sell them, it doesn’t matter how much those shares are worth today.
What matters is whether or not what they’re invested in is quality, because I don’t want to take out the same amount of money I put in. If I had, I would have kept it in the bank.
My motivation to invest the money in the first place is the expectation that these shares will eventually increase in value and can be sold for more later on. If they only returned my initial investment, I would be very disappointed.
So next time you see your investment portfolio numbers, remember that it’s the shares you own, not the money. Unless you’re retired and pulling it out, that’s good news.
And this lesson will serve us in good times too. Don’t be like some of the dot com “millionaires” who had millions in stock but who never redeemed it. Then when the stock went bust, they had nothing. But they never really had millions in the first place, just X shares.