Investing Lesson Learned: Always Have a Watch List Prepared

This week, I learned a valuable investing lesson that caused me to miss a great opportunity in the market.   Luckily, this lesson did not result in a realized loss like lessons in the past, so I can’t complain too much.  However, I did miss a golden opportunity to capitalize on Mr. Market taking a crazy turn (even more so than a few months ago).   What lesson did I learn and how will I apply it going forward?

What Happened?

I know I was not the only investor that was shocked about what happened on Monday, 8/24/15, the day the market opened up with a near double-digit percent loss.  For me, I was driving to a client at my new job and did not have internet access until about 9:45 AM, so I missed the opening bell and the initial shock of the decrease.   I received a text from Lanny that just said “Check the market” and once I saw the red and the steep decline, I nearly fell out of my seat.   The large loss in market value was not overly concerning to me, it was what didn’t happen next that was the big issue.

I had (still have) $700 in my Sharebuilder account that I could have easily deployed in the market place.  But instead of simply logging into my account and making a trade, I froze and had no idea which stocks to invest in or where to deploy my capital.  And trust me, I have a lot of companies in my portfolio that could use additional capital, especially after my recent push to begin increasing my positions to a $2,000 minimum (IBM was the most recent benefactor of this new initiative).  Not knowing what to do was a strange phenomena considering Lanny and I are usually pretty good at making a decisive investing decision (Lanny more so than me).   But for this period of time, I had no clue what to do.  And for me to figure it out, I had to stop what I was, perform research, and arrive at a decision.  All of this while valuable time was ticking away.

As it turns out, I didn’t have much time to think or perform the necessary research as I hoped for and was pulled into a meeting with the client almost immediately upon arrival.   Unfortunately, by the time the meeting was over and I had a chance to re-group and select and investment, the market had already began to rebound and those steep discounts were no longer available.   While the market still had a terrible day, this small opportunity had passed by and the figurative window was slammed shut.

Lesson Learned

As we have discussed before, sometimes negative experiences provide the best lessons.  And as I mentioned earlier, I am very fortunate that this lesson did not result in a realized loss.  So what did this missed opportunity teach me? Always have a stock watch list prepared with investments you are ready to purchase NOW.   Then, when a sudden opportunity presents itself, you are ready to act immediately.

Not having a list of investments available was my Achilles heel in this situation.   It is funny because Lanny and I recently prepared a watch list  that had me focused on purchasing either IBM and EMR.  So if I had a watch list ready, what happened and why wasn’t I prepared to act?  Well, after I created the watch list, I proceeded to maximize my investment in IBM with two subsequent purchases (here and here) to the point where I was no longer looking to add to my position in Big Blue.  In this instance, it wasn’t a failure to generate a watch list, rather to update my watch list once it became stale.  Even though I still could have purchased shares of EMR, I began to question whether that was the best investment option as other holdings of mine such as CM, CVX, and KMI declined in price.  EMR clearly was no longer the sole focus of mine and I never took the time to figure out which stocks I should focus on.  This left me with a lot of potential options…too many to make a quick/decisive decision.  I need to get better about building a watch list that will span more than a week or two and constantly updating and replacing stocks on this watch list as the market environment continues to evolve. 

Changes Going Forward

So what is the point of learning a lesson if you do not change your approach/strategy/etc. going forward?  Don’t worry, that’s a rhetorical question.   Based on this experience, I have two ideas that I am going to apply going forward that should allow me to capitalize on a sudden drop in the market place.  Instead of having to spend time researching for the best opportunity, these two strategies should allow me to process the information quickly and act immediately.   If implemented, I would have been able to read Lanny’s text about the market and purchase a stock within minutes, not hours.

  1. Regularly Update My Watch List, Even if I Don’t Publish a Watch List Article. I mentioned this point earlier and going forward I am going to place a greater emphasis on constantly building and updating my watch list. The point of our stock screener is to identify great dividend paying stocks that are under-valued now! So I should constantly be searching for that discounted stock that I can pounce on when the timing is right.   We have been great about putting together a monthly watch list and it has led to many great purchases, but from now on I am going to internally create weekly watch lists.  Hopefully a week will be sufficient to adjust to the changing market landscape.  Don’t worry everyone, we won’t be posting a weekly watch list article!
  2. Create a List of Stocks That I am Always Looking to Buy. This idea has stemmed from one of my favorite articles that Lanny authored last year, the Top 5 Foundation Stocks for a Dividend Investor’s Portfolio.  The concept is great.  Here are five rock-solid dividend paying stocks that pay a great yield, continue to increase their dividend, and will be a staple of your dividend portfolio for as long as you are willing the shares.   For me, I want to expand on this idea and put together a list of five great dividend paying stocks that I am always willing to buy.  Some of the stocks may be foundation stocks or some of the stocks may be one of our top 5 high dividend growth rate, low dividend yielding stocks…who knows!  So next time when the market suddenly drops and I don’t have a watch list of currently under-valued dividend stocks readily available, I will be able to turn to one of these five stocks and know that I am purchasing shares in a company that I want to own and fits my investing strategy perfectly.  You will see an article within the next month or so detailing this list and hopefully I will be able to update this list annually to reflect any changes in investing strategy or fundamentals of one of the companies on my list.

Summary

While it sucks that I missed this opportunity, I was able to learn a lesson and adjust my investing strategy to better prepare myself for the next sudden drop in the market.  If there is one thing we know, it is that history repeats itself and I am sure this will happen again some time in the near future.  Now, with these two adjustments, I feel better prepared and I am ready to act immediately when to opportunity presents itself!

What are your thoughts on my two changes?  Did you purchase any stock this week? Do you have a similar strategy?  Do you have a list of stocks that you are always willing to purchase?  If so, what are the stocks?  Please share so you can help me generate my list!

-Bert

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29 thoughts on “Investing Lesson Learned: Always Have a Watch List Prepared

  1. Bert,
    With volatility ahead, you will likely be presented with many more opportunities. For me, I am low on capital at the end of this month, so no luck here 🙁 In any case, I plan to invest regularly, so eventually, I will average my way in.
    A watchlist is always useful whether you plan to buy the dip or just invest regularly.
    Thanks for sharing your thoughts and good luck with your next purchase.
    D4s

    • D4S,

      You are right. Who really knows with this market place. So hopefully I am able to take this watch list and apply it many times going forward. That would mean there are some pretty nice discounts for us to scoop up 🙂

      Hopefully we will both be able to put our watch lists to use next time and purchase that stock we have always had our eye on!

      As always, thanks for stopping by!

      Bert

  2. Hi Bert, sorry to hear that an unfortunate timing of a client meeting and indecision made you feel you missed out. I too missed out on buying anything that day, since I didn’t have the cash ready unfortunately. So hopefully for both of us that little uptick in prices on Tuesday will be temporary and provide us with another extra low opportunity to average down. Got to keep in mind that markets are still very down as it is, the TSX is down 7% this month!

    As for myself, I generally have an idea of what I want just like you do. But I also keep a Google Spreaddoc that updates the stock prices from G.Finance and is set up so that, say I have $800 on hand, it auto shows me how many shares I can buy, how much div’s they will give me and cash leftover after the purchase. Makes it very easy to see and compare exactly what I could get. Perhaps something like that would help you out for next time.

    Best of luck!

    • Wisp,

      Unfortunately it seems that the market has gained back most of the losses from early in the week. Bummer, but who really knows what Friday holds anyway. As you said, it is a bummer we both missed out and as others have pointed out, I am sure there will be plenty of other opportunities to buy with the current market environment.

      That’s smart to have an automatically updating spreadsheet. Google docs are nice because they can be accessed at any computer or phone. That’s not a bad idea and I may have to look into stealing your idea for myself. Does it refresh every time you open the document or do you have to refresh it? Is there a way for the document to send you alerts in the event you cannot actively check the market?

      Thanks for the suggestion. I definitely want to find a better app to use. The question is…which one. Have a great weekend!

      Bert

      • Yup, it automatically refreshes the data every time you open it, or every 15-20minutes when the document is open. 🙂 Not sure about alerts, havn’t tried to do that. Will have to look in to it.

  3. Its part of the learning experience, I suppose. I missed out on buying JNJ in the low 80s too 🙁
    However, I dont think this whole correction is behind us – theres more volatility to come – so, stay tuned. Im hoping some good opportunities show up – even though there are some fantastic values out there.

    Best wishes and happy investing
    R2R

    • R2R,

      The consensus from all commentors is that we will have many more opportunities like this. Thank goodness we all have a long-term investing mindset that will allow us to stomach some short-term volatility and decreases in market value. I am really hoping the market stays down during September so we can pick up more DRIP shares during the largest dividend paying month of the quarter…one can only hope!

      Thanks for stopping by!

      Bert

  4. Ciao Bert,
    On top of keeping a list at hand I am also working on a model that sets aside a certain amount of cash to have 1000/2000 euro/dollars always available to make a trade. I have had the same problem of being short of cash and full of ideas, and this is not so good… :/
    The hit surely shocked the market but it was positive to realize a lot of mistakes and areas of improvement in my strategy! 😛

    • Stalfare,

      If only we had an unlimited supply of money. Imagine how large of a passive income stream we could generate. I’m interested to hear more about your model. Are you calculating a savings rate and transferring money to savings? Or does it function more as an algorithm that will automatically spit out the best dividend paying stocks at any moment in time? Have you written an article about the model yet?

      If you need a few beta testers for your model, look no further than Lanny and me!

      Bert

  5. The beuty of being a long term investor is that we don’t need rely our investments on the day-to-day mood of Mr Market. I wouldn’t be too hard on myself if I were you, the market has been heading south since april. Either way, it’s always good to have watch list. 🙂
    – Mraitn

    • Thanks for the encouragement Mraitn. Part of the reason I’m hard on myself in this situation is because there were some great, foundation type dividend stocks that suddenly became discounted. Companies like MMM, PEP, SBUX, etc. that always seem to trade became affordable out of nowhere. This would have been an excellent time to pick some up and add the income to my portfolio…Oh well, hopefully everyone is right and there will be a few more opportunities like this soon!

      Thanks for stopping by.

      Bert

  6. Bert,
    Don’t beat yourself up over it. I did not come across the drop until I got a text at 930 about something else and thought ‘hey lets see how its doing after Friday.’ Honestly I did not have anything to add as my money is mostly tied up, but it was still a ‘dayum’ moment. If I did have cash available, I have a huge post to write.

    Either way, there will be more opportunities. I feel this up and down volatility is far from over. And what benefits us are all of the uniformed people who sell because the journalists or advisers telling them to sell. Our biggest advantage is time. Our second biggest is we do this ourselves, buying things that pay us, not just waiting for a stock to appreciate. In addition, I almost feel like I want fewer people doing DGI. That way when the swings come hard and fast there are fewer people standing there to catch the falling goods = cheaper prices and more for us. Plus, If we all reach the point and retire with awesome FI stocks at our backs, who will do our jobs :).

    – Gremlin

    • Gremlin,

      I appreciate th kind words and the encouragement. How does the saying go…”Patience is a virtue.” Trust me, if I had a nice chunk of cash available I still would have found a way to purchase something. LEt’s just say I transferred some cash over ready and I am ready to pounce at the next flash sale. And trust me, I have the stock picked out already…but you all will just have to wait and see.

      You are absolutely right, time is our best friend here. Being a buy and hold dividend investor in this kind of a situation is great. Instead of panicking, we see an opportunity. I love how our mindset is constantly the inverse of those who do not share our passion for dividend investing and just chase appreciation. I agree, let’s keep the secret of dividend growth investing among our small community. we definitely do not want that many fund advisers catching on because unfortunately, we don’t have the resources to compete with them. Plus, beating them is much less satisfying than beating Lanny!

      Thanks for the great comment!

      Bert

  7. Good learning experience but don’t beat yourself up on this. There will be more volatility ahead and I think the market will drop a bit more further. I’m holding off a bit before pulling the buy trigger.

    • Thanks Tawcan. It is hard not to, especially since I was not able to come away with anything. But hopefully you and all the other commentors are right and I will be able to apply this lesson soon. I will be much more prepared for Flash Sale #2 and ready to capitalize when the iron is hot. Do you have a certain stock that you are targeting?

      Bert

  8. I created a watch list on june 25. I added one additional piece of information: i entered a buy transaction on that date. The performance of this list has been eye opening. My worst performer is CVX, which is down 28%. NSC / UNP are each down over 16%. When you view it over a window, you realize a 2-3% move on a day doesn’t tell the story. XOM now trades with a “6”, remarkable.

    The best part is that i am on the sidelines and didnt buy anything.

    • That’s an interesting way to look at it, especially considering the performance of the two industries you are following closely. The commodity and railroad industries have been getting slammed recently. What’s even more remarkable is that the floor continues to fall, even when you think it can’t get much lower. Honestly, I have decided to stay away from the oil industry for now because of it. I have had a different strategy with railroads and I will continue to add to NSC if the price falls. I love railroads and their insanely high barriers to entry.

      But heck, I can’t blame you one bit for waiting on the sidelines. Are you waiting for oil to hit a certain price before investing again and lowering your cost basis? Have you added other stocks or industries to your watch list?

      Thanks for stopping by!

      Bert

  9. Don’t worry, although Monday presented some great opportunities, there is more volatility ahead. Having a list of stocks you are always ready to buy is a good idea but much like your watch list, it requires updating, I used to have a list of “always” but it morphed into this week bc I was able to update my one sheets I keep for each stock. I mention this bc As committed as we are to long term holding things change. That said yes, it’s a great idea to have some “go to” stocks in a surprise event. KO is my go to but bc I had just sold a put on Friday, when Monday came I jumped on CVS at $79. CVS was not a go to for me but I couldn’t pass it up.

    • Dividend Chimp,

      You are right, these lists need continuous updating. I’m sure many DGI investors from the 70s would be in hot water if they never updated their original go-to watch list haha Unfortunately, that requires time, which also trades at a premium for me. I like the buy in CVS. There has been such a run up in that stock over the past few years that I stopped following, figuring it would always trade at a premium and it was out of my price range. But now it may be time to consider CVS or Walgreens once again.

      Thanks for stopping by and the tip. I’ll have to check it out!

      Bert

  10. Hey guys! I’m enjoying your website so far! Ive been researching dividend stocks lately. Personally, I make decent money buying/selling bitcoin using technical analysis. But I dont get any sort of dividends. So here I am looking deeper into dividend earning stocks and found your site. I was perusing some of your articles and while I enjoy reading the direction you are in… frugality, etc. Some stocks like CVX or ADM or NSC were all bought close to their peaks. Some examples from Berts June summary…

    CVX – bought in April around $105? You bought in a downtrend. Early TA warning signs to sell showed up last Aug/Sept, with downtrend signals in Sept/Oct before you bought in (EMA & SAR on 1month). CVX sits at $78, about 25% less than you bought it.

    ADM – bought in April around $48? Early TA warning signs to sell showed up this past February, with downtrend signals this month (EMA & SAR on 1 month). ADM sits at $45, about 6% less than you bought it.

    NSC – bought in April around $100? Early TA warning signs to sell showed up last January and October, with downtrend signals in May after you bought (EMA & SAR on 1 month). NSC sits at $78, about 20% less than you bought it.

    My point is that 2-3% dividend yields become meaningless.

    I havent gone through your whole site to understand if you sold any stocks, or other criteria you use to buy/sell them. I honestly think you are going to get wrekt if you are not looking at other aspects of each stock. Your screener does a great job covering fundamental analysis, but it needs more, like coupling TA also.

    Anyways, my 2 cents. Ive been wrekt and come back from the grave 🙂 Good luck!

    • Jake,

      Thanks for stopping by and the kind words. I appreciate your analysis and you bring up a fair point about the appreciation of the stock. As you pointed out, our focus on this website is centered on the fundamental analysis of a dividend paying stock due to the fact that we are long-term, buy and hold investors. I can much less about the short-term fluctuation in the price of a stock than I do about the company’s ability to sustain and grow their dividend for a long-term period. If the price decreases in the short-term…oh well, I will just re-invest my dividends at a lower price and receive extra shares.

      And yes, the stocks you mentioned have not been my best performers since my purchase. But you raise a fair point, maybe I should spend a little more time researching the broader market and current economic environment to see if there are any signals that the economy is slowing down and the stock market may be impacted. Definitely something to consider going forward, especially if there are trends that are indicating as such. Information is our best friend and there is a lot of it at our disposal. We would be stupid not to use every piece of information that is readily available.

      Again, thank you so much for stopping by. Hopefully you will be jumping on the dividend investing bandwagon soon.

      Bert

  11. I read your article and after this I was thinking, you try to time the market. You like to have a quick decision on low market prices where you have a time window of lets say 1 hour. OK, the shares were cheap at the beginning and after the cut the market increased around 3% from the low.

    There are two thoughts on this:

    On Monday the market dropped around 7-8% in the beginning. Lets say you have 2.000 $ to invest: You save around 160 $ with a buy if you hit the best moment. If you werde lazy or scary or whatever you bought when the market was 3% higher. What happened: You have to pay 60 $ on top. Is this really an amount to think for a longer time or even to create a special buying list or take the time to write an article to ask the people what they buy? I´m not sure of this. Look at the amounts and you can calculate this with your 700 $ :). Besides: I didn´t do anything on Monday. I will invest when I have enough money in shares which are worth the money.Thats all. Keep cool.

    My second thought: I read from people when Chevron decreased from 130 $ to 100 $ and after this climbed quite fast to 110 $, that they regret not to buy them for 100 $, because this is a chase. We now see, how much Chevron costs and it is still not a chase because we have the low oil price so this company is not able to earn that much money than one year before. Do you think Chevron is cheap? Are you in hurry to buy it? Same for all the shares which dropped on Monday you can ask the same questions. The market dropped not too much, we didn´t have a crash and may be this correction is only short. But you don´t know it. May be the cheap prices of Monday are the expensive prices in December?

    Quick Decisions: If you really want to make a quick decision take one of your existing positions and buy it. Do not think, if you believe this is a one time opportunity. It doesn´t matter too much if you buy company A or B.

    Remember: If you are doing dividend investing you have 20 or more years time. In five years you don´t think of what happened today. The example from dividendmantra of buying an investment just before the crash 1987 and after the fall of 22.6% of the dow two days later is really telling. And this is a much more sharper decline than on Monday.

    Attached the link:
    http://www.dividendmantra.com/2015/08/time-in-the-market-trumps-timing-the-market-for-the-long-term-investor/

    This!!! Nothing more to say.

  12. Not sure if you guys have heard of this app canned Robinhood. Its available both on iPhone and Android. You can buy (and sell) stocks with no commission fees. Makes sense if you are just buying stocks for the long term dividend growth. Ive tested it out recently just to try with only $100. They make there money from VC funding and in the future it sounds like margin trading. Buying and selling is easy, but its through the app only. I dont like that I cannot print statements or view my portfolio on the website (I guess I would have to take screenshots on my smartphone?). Again, everything so far is done through the app. Its still pretty new, but a great idea.

  13. Bert,

    Good post and idea. Glad you learned and it wasn’t a painful lesson. In a way, what you describe is almost like a DGI emergency kit! Just add money, hahaha!! Take care.

    – HMB

  14. A good lesson learned! I’d say however that a weekly watch list is a lot of work for not much in return. The market won’t always present opportunities. Maybe you could do these for a while, but then switch for monthly watch list. Actually, I think the best idea is “stocks that you’re always looking to buy” along with their valuation. These are the ones you should focus on in the case of a sudden market “crash”. Why? Because these probably are the best in term of quality and future growth.

    Cheers!

    Mike

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