Yes, it is possible to go from stock market volatility to stock market stability. Hear me out.
When people buy stock, most people expect and hope the stock to increase, afterwhich they expect to sell the stock for a profit. This is the common way of investing. The metric they use, the only metric that measures their goal, is the price of the stock.
Since stock prices vary every day, and all day when the markets are open, price volatility to built in to the equation. Stocks purchased in this methodology must vary. Hence, volatility is unavoidable.
Another Way
However, buying in order to later sell is only one way, There is at least one other way. Take for example Warren Buffett. While his company Berkshire Hathaway does sell stock periodically, many of their holdings are held indefinitely. Which means that they were not purchased or held with the expectation that they will make a quick profit.
When buying stock for its dividend, then one trades price volatility for dividend stability. It is a different way, and not always easy to to transition into. When speaking about this method with an acquaintance, I was told “It’s too slow.” Yes, it is slow.
The Way
The slowness of dividend investing is one of its strengths. There is no possibility of trading on rumors, or buying and selling on a daily basis, or following the hottest trend, when purchasing stocks for their dividend. There is no need to stare at a stock chart for hours every day when dividend investing. There is no there there.
What there is is the freedom and time to think about other things. There is the opportunity to leave all the noise behind. Let others make all the noise and react to all the noise. What dividend investing has given me is stability and calmness.
Up and Down
Yes, things sometimes decline. During a market correction or crisis, my net worth will decline. Income suffers when some companies reduce or eliminate dividends. But these events are small and not as common as the overall price volatility that the ‘investing to sell’ crowd experiences. I know my financial foundation gets stronger each time a company whose stock I hold issues a dividend.
What about you? Tell me your thoughts here.
The illustration of a blue heron is from Volume 1 of “Natural History of Carolina, Florida, and the Bahama Islands: containing the figures of birds, beasts, fishes, serpents, insects, and plants: particulary the forest-trees, shrubs, and other plants, not hitherto described, or very incorrectly figured by authors. Together with their descriptions in English and French. To which are added, observations on the air, soil, and waters: with remarks upon agriculture, grain, pulse, roots, &c.”, by Mark Catesby and George Edwards, in 1754. Courtesy Biodiversity Heritage Library at The Smithsonian Institution.
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