Australia had its last recession in 1991.
While I lived through it, I wasn’t really concentrating on the fall of the share market. Learning how to use the toilet by myself and colouring in was taking up much of my time.
In 2008 when the Global Financial Crisis hit, I was 20. I remember receiving my $900 as part of Prime Minister Kevin Rudd’s Stimulus Package. I saved some of it but I also distinctly remember a close friend and I went shopping after we got it. I didn’t own any shares at the time and, by all accounts, Australia did quite well and managed not to fall into recession. As such, while I knew it was occurring, it didn’t have an enormous impact on my life.
Fast forward to the present day. Poopsie and I have a large investment portfolio. We both have superannuation accounts and we have a large personal portfolio. The majority of our personal investments are in index funds, with a handful of individual shares that we still have from before we discovered financial independence. I’m not paying any attention to our superannuation accounts. We don’t count these as part of our net worth as it’s such a long time before we can access them. However, our personal portfolio is definitely accessible and therefore an important part of our financial independence plan.
In recent weeks, the Australian share market has taken a beating, as have markets all over the world. The COVID-19 pandemic is not only a health crisis but it is creating an economic one as well.
The recommendation of many in the FIRE community is not to look at your accounts as it will only cause you to panic. But I’ve been taking the opposite advice.
I’ve been looking at our investment accounts a lot. I think that this is good opportunity for me to see how I respond when things aren’t looking rosy. I’m creating my own version of exposure therapy – by looking at our reduced portfolio regularly, I get more and more used to it (A Purple Life does something similar).
It has definitely caused me concern, especially the day our portfolio had dropped six figures, but I am getting used to it. I am remaining calm and reminding myself that this too shall pass. The markets will go back up and our early retirement plan will continue.
Of course, the big reason I can stay calm about this is because we have not recently retired. However, when we eventually do retire, we will need to cope with market downturns. I’m hoping that by exposing myself to it now, I’m decreasing the chance of freaking out when it inevitably does happen while we’re retired.
Have you been looking at your investments? How has it made you feel? Have you remained calm?
Exposure therapy! Clever. Yes, I’m looking at my portfolio regularly at the moment, though I’m still in with a buy and hold attitude (mostly index funds and ethical ETFs). I bought my first shares 10 years ago in 2010, after the last crash so I hadn’t experienced this kind of drop yet. While I’m also not fully retired, the numbers seem merely hypothetical for now, especially as they’ll change so much before I start withdrawing. I’m not worried – mostly fascinated.
That’s a good point. As we are in the accumulation phase, we don’t need to worry about withdrawing. Which means this exercise is purely theoretical – I wonder if it would be different if we were retired?
What a good idea. As you say, it gets kicked up a notch when you are actually retired. It’s character building!
Have you been looking at yours Ozstache?
Haha, yes. It’ll take a lot more than the market stumble we’ve had to date to flush me back out to work again!
I’ve been looking at our investments and haven’t been too worried about the drop in value. It’s entirely to be expected that there will be a number of falls over time, and given I am still working and have a nice big emergency fund I don’t need to sell anything so am happy to just ride things out.
It may also help that I’ve seen orders of magnitude worse in losses in my past career so even though there isn’t any actual relationship to the impact on me, this just seems like it’s not worth losing my calm over.
I think it would be very different though for someone who hasn’t seen these drops before, and who has now lost their job through no fault of their own, and I really hope they’re doing ok.
We definitely have it luckier than many, Aussie HIFIRE. And I agree, it’s important to remember this and hope for those less fortunate than us.
Interesting theory here! Exposure therapy, I like it. Like you I was also learning how to use the toilet and staying out of general mischief in 91′. I think the market has stablized a little bit but where the recovery is V, U, L, W or whatever it may be no one knows. I would be curious as to how exposure therapy works in a prolonged downturn! Might give it a go myself.