This Is Like Christmas For Dividend Investors
I don't know about you, but September was one of my portfolio's worst months in a long time — quite possibly, ever.
Charles Schwab | My portfolio performance in September
I'll give you all the details here, but in a nutshell, my portfolio saw a near 4% drop just in the last 30 days, and October is shaping up to be more of the same.
In the past, I've talked about this being the double-edged sword of dividend investing.
On one hand, you feel disappointed when the stocks in your portfolio are taking a hit. You see your hard-earned gains evaporate with each passing day, and doubt starts to creep into your mind.
On the other hand, you know what happens when a stock's share price goes down: the dividend yield goes up, creating an exciting opportunity to acquire more shares of your favorite stocks at a discount while generating a higher cash-flow return on your investment. It’s like Christmas for dividend investors!
Balancing these two emotions as an investor is no easy task. In fact, I would argue that this is the most challenging part of the craft.
The market, after all, is known for its ups and downs, and it's these down periods that truly test our mettle as investors. I understand how difficult it is to hold strong when there's a voice in the back of your head screaming, "Sell everything!" I implore you to soldier on though, as history has shown us that patience and resilience often pay off.
During these volatile times, it's helpful to remind yourself of some key principles that can guide you through these stormy market waters:
Focus on the Long Term: While it's natural to react emotionally to short-term market fluctuations, it's essential to remember your long-term investment goals. These long-term goals won't likely be derailed by a single month (or two, or three) of market turbulence, and can create the opportunity to better your position in some of your holdings.
Stay Informed, but Don't Obsess: Keeping an eye on your investments is important, but don't feel like you need to obsessively check your portfolio every few minutes. Remember that daily fluctuations are noise, and they can lead to impulsive decisions. Trust in your strategy and due diligence.
Keep Your Eye On Your Income: As I mentioned earlier, declining share prices lead to higher dividend yields. If you're confident about the long-term prospects of the stocks in your portfolio, then this is an opportunity to swoop up some more shares at a discount, lower your cost basis, and increase your income at a faster rate.
Market fluctuations can work in your favor, and volatility is something to be taken advantage of.
On that note, I want to hear from you: which discounted stocks are you looking to add to right now? Write to me here and let me know. Here are five buying opportunities in my portfolio that I'm looking forward to taking advantage of.
And a big thank you to the 15 readers who responded last week. You rock! 🙌
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ICYMI
The Biggest Lies You Were Told About Dividend Investing
Dividend investing is hands down one of the easiest ways to create passive income, and over the years, this style of investing has been gaining in popularity with more people starting to take an interest, many of whom are on the younger side.
While this is awesome to see, there are numerous myths that keep getting spread around about dividend investing that we need to shed some light on. We'll be going through them in this video, and I'll give you my take on each one.
CAREFULLY CURATED
📺 Most Dividend Investors Get This Wrong - If you plan on investing for a long period of time, which I'm guessing you are, then you're guaranteed to make at least one mistake. A big one that I think we all make, especially when first starting out, is not understanding the full picture and only focusing on a stock's dividend yield. This video talks about why focusing on yield can be problematic, and teaches you what to do instead.
🎧 An Interview with William Green, Author of Richer, Wiser, Happier - William Green is probably my favorite author in the finance space, and his book Richer, Wiser, Happier is a must-read for any investor. In fact, if you're just starting out, you should make it one of the first books you read. In the meantime, this interview with William Green is worth a listen, and you'll get to hear how he went from having his first article published by accident to interviewing some of the world's greatest investors.
📚 Why This Wide-Moat Stock Yielding 7% Is A Buy - The high-yielding, wide-moat stock in this article has raised its dividend for the last 25 years in a row, and is actually one of the highest income producing stocks in my portfolio.
SINCE YOU ASKED
"If you could start again, would you go for growth to build up a dividend cow, or go with mostly dividends again?"
- Joey Stidham | YouTube
If I could go back in time and start investing from scratch, I would still choose the dividend investing path without a doubt.
This approach aligns perfectly with my temperament, and in my opinion, dividend investing is the gift that keeps on giving. It's one of those things that just gets better with time, and I'm even more enthusiastic about dividend investing today than I was as a brand new investor.
However, looking back, I would have structured my initial portfolio a bit differently. I actually put out a video talking about this exact subject just a couple of weeks ago, which you can watch here.
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DREAMING OF MORE DIVIDENDS?
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