Normally, a stock yielding 6 or 7% would not tempt me, as I consider these yields to be out of sync with normal returns. However, in recent days some companies with declining prices have seen their yields spike.
It is said that prices decline for a reason, and although each company is different, it is up to the individual investor to determine whether a price decline is sign of retreat or a temporary aberration that is an opportunity that could be taken advantage of.
I have made some purchases lately because of declining prices of companies that I feel are solid but have fallen. I certainly expect that over time they will recover, and I am willing to take the risk that in the long run I will benefit from the combination of reinvested dividends at lower prices.
I had purchased some stock previously in these companies, as a result I have my records to show me where the current prices are now compared to earlier. When companies prices fall below my target number, I pay attention. Based on my perspective and inclination, if I make the decision to buy, then I do.
Limit?
I do not have a pre-imposed limit on how many shares of one company I would buy shares in. Perhaps I am a normal investor in feeling more comfortable in buying more shares in a company selling at $9 a share compared to $90 a share, all things being equal. Of course, all things are never equal. As my finances are not unlimited, I am as prone to the same financial-emotional biases as anyone else, it is easier to spend $900 to buy 100 shares of company A compared to $9,000 for shares in company B.
On some level this is understandable, at at other levels it is absurd. I must perceive the relative strengths and weaknesses and risks of each investment and each company. I suppose I could just say it is easier to make some decisions than others.
Upshot
I suppose what I have learned from this situation is that investing is or can be a major emotional and psychological endeavor, having more to do with one’s personal inclinations than it strictly does with finances. This is not a new observation. We could defer all decisions to a robo-advisor, but that would remove the human side of investing. No, I do not want for example to buy tobacco companies, even though their dividends outpace most other companies, but that’s just me.
So the need for comfort drives my decisions, and I suspect many other peoples’ as well. And that is not necessarily a bad thing. I do need to acknowledge that “comfort”, like everything else is a double edged sword. I could go overboard on trying to avoid what I don’t like. But then, trying to find, for example, a company with all rainbows and unicorns would eventually mean I could not invest in anything.
Where
So finding the balance is everything. I would not like to be placed in the position of emotionally defending my decisions in the light of someone else’s strict moral code. I need to find safety in my own.
When is temptation too much? Let me know here.
The page of samples of Armenian alphabets is from “Pantographia; containing accurate copies of all the known alphabets in the world; together with an English explanation of the peculiar force or power of each letter: to which are added, specimens of all well-authenticated oral languages. Forming a comprehensive digest of phonology” usually shortened to “Pantographia: A Specimen Book of All the Alphabets Known on Earth” by Edmund Fry, published in 1799. Courtesy Wellcome Library, London, U.K.
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