It all depends on one’s attitude.
Choice 1: Oh my god, my stocks are down 25% 30% 50%! What should I do? I’m underwater. I’m losing money. How low can it go? Should I sell everything?
Choice 2: We now have the chance to buy at lower prices and lower valuations: This is a great opportunity, that comes around only once in a decade or two. What’s not to like?
It’s Up To You
Your attitude makes everything. This can be a great time, or a horrible time. What is your choice?
For The Long Run?
No, I didn’t sell when things started to decline. From where I sit, it is quite possible stocks will continue their slide downwards. I have not and will not change my plans.
For those who buy stocks with the purpose of later selling at higher prices, these can indeed be trying times. In such scenarios, how long does one hold on hoping for higher prices? After all, one is losing money, at least on paper, when stocks decline.
The Other Way
Sticking to the long-term dividend investing strategy is where I am at. I buy not for the purpose of selling, but for the purpose of receiving dividends. And I usually reinvest those dividends. The act of reinvesting those dividends means that my holdings grow seemingly automatically, without needing any further input from me, unless I intervene.
What does this mean “unless I intervene”?
While the vast majority of my stocks are where I reinvest dividends. There are times that I receive dividends in cash which is deposited in my checking account. Or sometimes I buy more shares when the price is right.
There are a few companies (three at present) where I do dollar cost averaging: a set amount is deducted monthly from my checking account and used to purchase additional shares in those companies. This is incredibly easy to set up.
Dividends I receive in cash are used to fund my dollar cost averaging in other stocks.
Buying more shares means future dividends will be buying more and more future shares, and generating more and more dividends. This is the path to true wealth.
Eyes
While I do have my eyes on prices, I also keep a close watch on dividends. I aim to buy at low prices and low valuations. A stock with a too-low dividend yield, or a too-high dividend yield, are not something I consider. A stock with a too-high valuation is also off the table. I do not want to speculate. If I wanted to gamble, I’d buy a lottery ticket.
What time is it for you? You can tell me here.
The illustration of butterflies Papilio Heliacon and Papilio Indaeus is from “An epitome of the natural history of the insects of India : and the islands in the Indian seas: comprising upwards of two hundred and fifty figures and descriptions of the most singular and beautiful species, selected chefly from those recently discovered, and which have not appeared in the works of any preceding author, the figures are accurately drawn, engraved, and coloured, from specimens of the insects; the descriptions are arranged accordin to the system of linnaeus; with references to the writings of Fabricius, and other systematic authors”, by E. Donovan, and was published in London, in 1800. Courtesy Biodiversity Library at the Smithsonian Libraries and Archives in Washington, D.C.
The post It’s a Dangerous Time, It’s a Fabulous Time appeared first in Smile If You Dare.