Does it seem that some stocks don’t move at all? Prices bounce around only a few cents at a time for months or years… and growth seems elusive. Should you ditch them?
There are such stocks that rarely make any big moves.
Often they have so many shares outstanding that it takes an enormous amount of activity to see any significant movement. If ever.
Excitement
The financial and general press focus on things that move. Excitement is the name of the game when it comes to deciding what people want to read about. Action begets investment, and investment is the money game. Risk underlies all activity of this kind.
There is nothing wrong with chasing risk is that’s one’s thing. Just be aware and accept one’s decisions. Where things go wrong is when FOMO masquerades as investment, and we think we are investing when we really are speculating.
Not Everything Moves Dramatically
Some companies’ stock does not garner as much press as others. Industries considered “boring” often lag in investor interest. Industry groups such as utilities and basic materials sometimes have stocks whose volatility is much less than most.
When a stock stays relatively stable, it becomes like a bond. With a bond we receive interest for the term of the bond, but there is no growth in the underlying security.
When a bond matures, we receive the interest and the principal we invested. The end.
Are They Worth It?
As a dividend investor, a seemingly “stable” company may have a hidden advantage. If its dividend is also stable or growing, the price is of secondary importance. As I aim for income, such kind of stable company can be attractive. I can get reliable income without concerning myself with volatility.
On the face of it, with a stable stock, assuming there are dividends, we receive the dividends and if the price stays about the same we could recoup our investment if we sell. But here was little upside. Like a bond.
But
One way to find growth in a stock with a stable price is to reinvest dividends. With each dividend reinvestment, we grow our holdings. The number of shares thereby increase, and so then do our dividends increase as well. Stocks that don’t move are not for the impatient.
Are you an impatient investor? Let me know here.
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