Shares, not dollars: this is my way mantra to cope with Mr. Market’s relentless assault on my retirement portfolio.
Looking at the value of my retirement holdings is an exercise in self-inflicted pain. I don’t plan to decrease my investments OR to adjust my overall fairly aggressive asset allocation, but that doesn’t mean I don’t grimace a little over a 30% drop in the value of my contributions.
But – if I just change my perspective a bit, and turn my focus from dollars to number of shares, this downturn has been great! I’m picking up shares at all kinds of discounts. At the beginning of 2008, $5,000 bought maybe ~170 shares in my funds. Now, $5,000 can buy ~240 shares. 170 vs. 240 = HUGE difference.
The expectation, of course, is that these shares will (over the long run) grow in value. Capitalism is the essential exercise in optimism – the optimism that things will keep getting better, that productivity will increase, that people will prosper. That’s why I buy into America (literally, I buy America – well, the U.S. market index, anyway).
Of course, shares can lose most -or all- of its value (exhibits A, B, and C). But I don’t hold any individual stocks. In addition to the U.S. market index, I hold an international index and a bond index.
So, if my shares become worthless, the world has probably gone to hell in a hand basket. At that point, retirement will be the least of my worries. I’ll probably be foraging for berries and hunting small rodents for sustenance.