Why Do I Pay More Attention When Stock Prices Decline Than When They Rise? There’s a simple reason….
I am not a day trader. Many weeks can go by and I do no buying. But there is always something that attracts my attention.
That Special Something
When there is a broad decline in the stock market, I sit up and pay attention. I check the prices of stocks I am interested in. If the price becomes amenable, and the company and its condition fit my criteria, then I will sometimes buy more shares.
How It Is Done
This is how I maintain my dividend portfolio. I aim to keep my costs low, and by buying when prices decline, I have that opportunity.
Unknown
Of course, I have no idea if prices will decline further, rise, crash, go nowhere, etc. I have no clue, and neither does anyone else. So the best I can do is look at current conditions, extrapolate as to what might happen in a relatively normal situation, and go from there. Of course, nothing is ever “normal”, but I try to make the best of it.
What This Is
In reviewing this description, it becomes obvious it is the definition of “buying the dip.” I do buy some stock sometimes when markets decline, I am not constantly monitoring the market’s pulse, nor am I obsessed with buying.
What This Is Not
By looking to price declines for my stock purchases, I could be avoiding buying stock that is not declining. There is no magic guarantee that prevents high price stock from getting higher. So my decisions about buying at declines have positive as well as negative consequences.
The Line, Bottom
While, as described, I sometimes do buy on declines, it is not the only time. I will sometimes buy a stock when I determine it is time to buy. I prefer “buying low” beucase then I look to beneficial yields, and beneficial yields are then name of the game for dividend investors.
Who
Conventional wisdom has many people panicing at market declines. Perhaps this is true. For me, I consider the panic crowd to be small. I would think many are actively managed fund traders and hedge funds traders, and so on. These traders are measuring themselves against others in their peer group. No one wants to be berated for losing more money than someone else in a competitor. So they must follow the trends. So while they are trying to outdo a rival, or be at least as good, we can ignore them and look to opportunities. Who causes volatility is nice to know, but to know that volatility is not a curse but an opportunity is as important.
We have the opportunity to grow our income. Quarter after quarter, our income increases because we have stuck to the plan. Buy solid companies with growing dividends. Buying additional shares when appropriate is a way to increase our income.
Do you panic at price declines, or do see them as opprtunities? Let me know here.
The stone representation of a bird is made of slate, and is from a native American civilization, ca 1500-500 BCE. Courtesy, Minneapolis Museum of Art.
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