Two years ago, around this time, I was out to dinner with a good friend of mine. She told me she and her partner had each put a bunch of money into their Spaceship portfolios. The markets were at record highs, everyone was talking about it, and they were looking to join in. Why not?!
As it turns out, that would be the last dinner out I’d have in a while. Very shortly after, the word “pandemic” was used to describe COVID-19 for the first time, we all started working from home, and somewhere in between the stock market crashed.
My investment, her investment, his investment — they all dramatically dropped.
When you open your app and see that change, your stomach drops just like your balance has. That’s your hard-earned money and it feels as though it’s been erased, never to be seen again. And when it happens again the next day and the next? It takes nerves of steel to stick with it.
Here’s what happened. My friend kept her money in, while her partner took his money out. As the market slowly crept back up over the next few weeks and months, her investment ballooned, and she was eventually able to use that money to help her buy a property.
He, on the other hand, had locked in his losses by selling.
We know that for so many of you, opening up your Spaceship app right now is just as difficult as it was for my friends back then. The stock market is undergoing a correction and it takes nerves of steel to decide to stick with it when you see your hard-earned money diving.
On a more personal note, I’m not immune to the noise around the markets; working at Spaceship means I’m seeing more news on the markets than I ever was before, and that noise can get loud. Trust me — I know how hard it is to block it out!
So, you’re probably wondering: what does this mean for Spaceship?
We believe in the value of long-term investing. We won’t make any fundamental changes to what we’re doing; we know markets go up and down at times. This is a normal (although tough) part of investing.
When it comes to our Spaceship Universe Portfolio and Spaceship Earth Portfolio, we’ll continue to assess the stocks in those portfolios against our Where the World is Going methodology. That is, we’ll consider whether we believe they will continue to benefit from future trends and are defensible. (And our Spaceship Earth Portfolio stocks must also meet our sustainable investing criteria.) If we feel a company no longer has long-term value, it will be removed from the portfolio (and we’d let you know).
For our Spaceship Origin Portfolio, things are a little different.
If a company moves in or out of this portfolio, it will be because its market capitalisation has changed, not because we have made the decision to buy or sell it.
That’s us. Now, what does this readjustment mean for you?
When it comes to investing, it can pay to hang in there.
We have a minimum suggested timeframe of seven years for anyone holding an investment in a Spaceship Voyager portfolio because, generally, when equity investments are held for longer periods they tend to exhibit lower volatility than those held for shorter periods. (Although, naturally, past performance is not a reliable indicator of future performance.)
We also know that can be easier said than done when the market drops, but long-term investors tend to live by the “time in the market, not timing the market” philosophy for good reason — because by trying to pull out of the market on a bad day, you could also end up missing out on a good day.
J.P. Morgan Asset Management’s 2020 Retirement Guide has some insight into this.
Over the 20-year period from 2 January 2001 to 31 December 2020, if you missed the ten best days in the stock market, your overall return was cut by more than half!
To be more specific, if you put $10,000 into the S&P 500 Index, and remained fully invested over the entire period, you’d have ended up with $42,231. If you had missed the ten best days, you’d have ended up with $19,347.
All this to say, it can be worthwhile to stick it out. Some people even use market drops to put in more money and potentially supercharge their investments.
Having said all that, you should absolutely make your own decision, a decision that suits your personal financial situation. Again, past performance is not a reliable indicator of future performance.
And lastly, we know this isn’t easy, so if you have any questions, reply to this email — we’re here to help.
