It is easy to feel others are doing better because they took more risks. Just let’s look at the latest frantic growth of stocks related to Artificial Intelligence (AI).
Stocks such as Nvidia zoomed. Before this boom, likely Nvidia was not among those who favor passive or dividend investing.
So this brings up a major difference between what’s currently hot and passive/dividend investing.
The passive/dividend investor chooses stalwarts and sticks with them. Time will provide the returns if we stay the course. Compounding will do the work if we consistently invest over the long haul.
However, this approach means we will not catch the wave of the Next Big Thing. We will miss the hype machine’s sweeping pull into the rip tide of noise and glory.
I usually never think I have an insight into what will be the next hot market frenzy, so I am happy to invest my own way. For all the riskiness that following the noise parade may bring, I also know that this riskiness frequently/ often/ eventually develops into loss. And avoiding loss is a tenet of dividend investing.
In dividend investing we avoid frequent trading and rarely ever sell. This is in opposition to those who trade constantly, seeking an edge among the noisy crowd.
Once in a while, it seems simple to see where the crowd is going. For example, about a year ago when AI was hitting the media more and more, it seemed obvious Nvidida was in a good position. I was tempted. But I know that while I might have made some profit from buying Nvidia, and also know that would put me into the world of needing to monitor the ebb and flow of news about this or any other company.
One of the great benefits of dividend investing is that I do not need to monitor trends on a day to day basis. Buy And Hold to me means Buy And Sleep Well. I do not need or want to be a person consumed with the fear of loss. I do not need or want to be a person who is itching to pull the sell trigger because of seemingly bad news.
So while others let their trades make money, I let my dividends make money.
I know that prices of stocks are, at least in the short run, and sometimes much longer than that, divorced from reality. Prices move around a lot more than earnings or dividends because of fear and greed.
By trying to limit my dependence on fear and greed to motivate my decisions, I will stick to what I have been doing.
Are you swept up in the latest AI stock craze? Tell me about it here.
I wish I remembered what kind of squash seed I planted.
The post Missing Out or Being Prudent appeared first in Smile If You Dare.