Another trading day, another day of red across most of the ASX. How do you cope with falling share prices?
Well, for starters it could be a good idea not to look at your share portfolio. I'm not saying stick your head in the sand and be ignorant about it, but checking regularly isn't going to make your shares recover any quicker.
If you're invested in a portfolio of individual companies it is important to be aware of your performance over the medium-term and long-term. Checking every day is probably not good for your mind though!
I used to check my portfolio very often. Not every day, but several times a week. What was I hoping to achieve by doing that? It just made me a little anxious. The gains of that day were as irrelevant as the declines unless there was a specific news item.
These days I hardly ever check how my shares are going on a day to day basis. When I do look I use that check to decide what shares look like good value – it's a positive action, not a negative one or anxious one.
Still, if you're an Afterpay Touch Group Ltd (ASX: APT) shareholder it can be pretty nerve-wracking to see that your shares are worth 5% less than at the start of the day.
I try to remind myself that I invested in my Challenger Ltd (ASX: CGF) and Duxton Water Ltd (ASX: D2O) shares with at least a decade into the future in mind.
Another trick I like to play is thinking how little today's price movements will look in many years from now. A share price moving from $33 to $30 in a short space of time seems like a big drop. But when you consider CSL Limited (ASX: CSL) is now at $182 many years later, that $3 seems like a much smaller issue and is long in the past.
US Fool founders the Gardner brothers like to talk about how the Amazon share price, a US Fool recommendation, fell from US$100 all the way back to US$7 during the dot com bust in 1999. But, the underlying business kept growing revenue. Look where Amazon is now! We should remain focused on the fundamentals, not the share price movements.
Foolish takeaway
I like volatility for several reasons. It reminds us that there is a risk to shares, it gives us opportunities to buy at lower prices and it actually shows us that we can nearly always find a buyer for our shares every trading day of the year.
The best way to cope with volatility is to remember why you invested in your shares in the first place. Just because someone is buying CSL for a little less than yesterday or last month shouldn't mean anything in the long run.
