No one likes to see their share portfolio rapidly decline.

For most however, January 2022 has not brought much joy for investors, with the S&P500 down over 9% for the month so far, nearing correction territory.

How we manage our emotions plays a significant part in managing down periods, which are a natural part of investing in the share market.

When the market is down, resilience is harder. After all, share prices wouldn’t be dropping if so many people weren’t selling.

At times like these, I try to remind myself of the following:

1. I am not selling today. Is the daily share price really relevant if you aren’t intending to sell your shares today, or any time in the short-term future? If so, why draw so much attention to the daily price gyrations of the stock market?

2. Lower share prices means your money goes further. Would you rather invest when your money buys less shares, or more shares? Obviously the answer is that you want your money to go as far as possible, so these down periods are an opportunity to buy more investments. Buying more shares at cheaper prices, means you have more upside potential, more shares invested, which leads to more dividends and faster compounding. The best time to buy is when shares are on sale.

3. Your DRP will go further. When you invest, one of the quickest ways to compound your wealth is to take part in the Dividend Reinvestment Plan. This is where instead of receiving your dividend as cash, the dividend is instead reinvested in buying more shares. Similar to above, when the price of the company’s shares are lower, your dividend buys more shares.

4. Is now an opportunity to make changes? Oftentimes, investors have not made the most of legally available tax efficiencies when investing. One of the most common mistakes is a high income earner investing in their own name, paying tax at 47% on their investment earnings. Possible ways to minimise the tax payable include moving the shares to a trust or a spouse on a lower tax rate. When the market is down, there is likely less Capital Gains Tax payable, as your shares aren’t worth as much. These shares can potentially be transferred to a more tax effective structure, where the future growth compounds in a lower taxed environment. You may also be able to realise a loss, potentially minimising CGT completely. Please remember it is important to seek professional advice here and please refer to our disclaimer.

5. It’s time in the market, not timing the market. As one of the most famous investment sayings, history shows us that it’s time in the market that generates the highest returns, not timing the market. The global economy has survived World Wars, terrorist attacks, recessions, depressions, lousy Governments, and obviously, much, much more. The S&P500 has never failed to beat its previous high. There is no reason it won’t continue to do the same again.

When you buy shares, you are buying a part ownership in businesses that are constantly trying to grow profits and improve their overall business. Over time, this results in higher dividends and higher valuations. The value of every business in the S&P500 didn't decline by 9% in January, it is the market sentiment that has changed. There is a difference.