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- May 27, 2016
I do hold stocks but I have them in larger cap companies that have a long history of consistent dividend growth like Coca Cola (around 50 years of growing their dividend yearly) I reinvest those dividends at no cost back into the same companies (drip =divided reinvestment program)
The idea is that my holding will increase every year, and I have more and more shares overtime, and each of those shares will give me a larger dividend thus I can purchase more shares for free, when I retire, the dividend payments will become my income.
I own a few major companies that I believe have a high barrier to entry (so you don’t wake up with a new competitor overnight) so I own a few railway companies, visa (not a dividend stock), Coke, Brookfield asset management, and Berkshire Hathaway’s B shares
I haven’t sold anything even though I’ve seen my gains evaporate, but in theory as the price goes down, my dividends should be able to purchase me more shares, so in essence, a drip automatically averages down your position during a downturn.
Short term is micro is always more volatile and unpredictable, but if you have a long term outlook, you can have some more stable trends ie, more people doing online shopping and using visa instead of cash..
If you look at the stock market as a popularity contest instead of an exact weight measure of what a company is worth, you’ll do a lot better. You have to look at stocks as an actual (small) piece of a business. Sometimes great businesses with strong balance sheets become less popular and the market punishes them to a point where they look very attractive to a value investor.
If you went out and purchased 50% of a big successful business, you wouldn’t be selling or reducing your position every week depending on what people were offering you, you would most likely just focus on the business and keep an eye on management to make sure they’re doing the right stuff that made them successful in the first place.
Warren buffets lifetime average is 20%, so you can’t get too greedy and expect to become a millionaire overnight. I thinkthe market has this allure that people can make a quick buck, but thats not that likely.
Investing for the long haul is the best way to go, and investing in good solid profitable companies with a strong brand name and being comfortable in buying more of the same business if the stock price reduced by 50% or more.
That being said, intrest rates will continue to slowly rise for the next 10 years, and rates being so low already, central banks dont have the ability to cut rates to stimulate the economy. So not if, but when the next recession happens, it could be painful.
Buffet said great wealth is made and destroyed at the bottom of a recession, so having cash on hand to get in when there’s “blood in the streets” is always good too.
I think the market will continue to slide and go sideways for period of time, right now valuations are rich, so a stock price might not move up when the announce increase in their earnings to the point where the valuation comes down to meet the stock price. The global economy is slowing and the US is the last man standing, and if you take out the gains of Apple google amazon, the S&P500 would actually be flat or down down for the last year. I’d love to purchase all those companies at nice discount though
