Are you holding on as tight as I am seeing the fluctuation in the stock market? The rollercoaster has been hot and heavy since Tuesday and slightly reminds me of a few instances we had last year. I am never one to predict where the market is going nor what I think is the best stock right now, therefore, this article will service one primary purpose. That is – to hold on to the handle bars on the rollercoaster ride and understand why you are sitting in the seat, is what matters the most.
The Rollercoaster ride
I will sit on the seat, patiently. Why am I not doing anything during this wild ride of the stock market? There are a few reasons – stocks are reacting in such a fashion that it can be VERY distracting from the fundamental value of the company. Earnings haven’t changed and no one can truly predict that post-election, what the impact will be on forward earnings. I have now witnessed the same industry fluctuate in both directions multiple times in the exact same day. This also falls in line with – why I never try to time or predict the market.
However, I will say that you should continue to do what you are doing. With the price drops/swings, it may be a good idea to set limit order buys on companies you have been wanting. This will aid in the higher volatility, to capture that desired stock at a better price than expected. What I have seen the last two days, are that even the most sound/basic/boring companies are fluctuating just as much since the election. All stocks are subject/have been subject to this volatility. Know your price points on the stocks you’ve wanted and don’t hesitate to consider that as a viable option, kabish?
Read and pierce through the ups/downs, the thunder/lightning to truly determine the value of the company. Heck VF Corp (VFC) is now trading at $56.33; no longer undervalued – definitely needed some limit orders in the making to grab it when it was in the $52’s earlier, but an almost 10% increase from those prices and my analysis? No thanks. Then, on the other hand, Bert purchased Realty Income (O) in the $59 range and now it’s in the $54 range… ugh, see – talk about the wild swings – Bert, are you buying more, now? You definitely are in a more difficult situation, as these swings have been all over the place. There are a few things we can do, to not pay attention to the lightning.
We need to stick to our consistent screening methods. Is the price to earnings still below 18, with a payout ratio below 60% and a yield that fits what you’d want your portfolio to have? Do you understand that business and know that during the thunderstorms and big events, that services and production will continue? Will their dividend continue to grow? If you focus on your consistent approach that you have used for years, and years, and take out the emotion and “noise” from what has been occurring – you will thank yourself later.
During this time period, as well, with such volatility, it may open up even more opportunities, as well, that we may not have been expecting. What do you do about your capital? This bodes well in my aggressive approach and demeanor, that every single dollar counts, now more than ever (though it always strongly mattered in my eyes)! Therefore, keep saving aggressively, as you may end up using our capital on one action, when another stock you’ve been wanting a position, begins to show signs of hitting your screener metrics. These are just a few items to think about, during this turbulent times.
This is when our fundamentals and mind play a critical factor. How far are you willing to stick to your guns and your analyses? How strong are your feet and are you willing to stand your position on your values with investing and financial freedom? Are you going to react wildly and sell off/buy on that swing-reaction? If it’s for a foundation company for your portfolio because it dropped, then hell yeah, but are you going to buy that one company that was a speculative play, because it dropped 10%? Doesn’t sound like you should to me. OR are you going to sell off Johnson & Johnson stock because it jumped $4+ in just a couple of days? I’d move the hand away from the trigger if i were you.
I am going to be embarking on the challenge. I am sticking to the Dividend Diplomat Stock screener and will continue to make purchases towards my goals I have established. I will continue to build up my capital position and deploy when, based on the screener, the value is right to me. I haven’t made an individual stock purchase since my last deployment in September for Target (TGT) and T. Rowe (TROW). Guess what? That is OK. Though my portfolio has increased a few percentage points overall, my income hasn’t moved. That has also been a huge takeaway from this – my income only changes when companies are fundamentally sound and grow their dividend. For us dividend investors, that is what matters. Not the fact that it increased 6% Wednesday and dropped 3% Thursday, but how did the payout ratio change? Were earnings impacted? These are the real-deal questions.
This may be much more of an Italian banter (Bert, go ahead and make a joke), but I want us all to stay even-keeled throughout all of this, as we don’t need to have the knee jerk reaction to the rollercoaster ride. We do need to be prepared and ready, and keep a keen eye on saving money when we can, investing wisely as we consistently have been and follow the action plan that achieves your goals. Sounds simple, but adding in emotions can be the kink in the chain.
What does everyone else think about this? Have you been actively engaging in transactions? Have you changed your approach? Have you made a purchase on purpose or accidentally and wished you had more capital? Is your stomach queasy at all or have you kept a “stonewall” like position in the midst of all this? Would love to hear everyone’s thoughts! Thanks again everyone, stay hungry, stay consistent and kick ass.