Ever since starting my dividend portfolio earlier this year, I have been more aware of just how prevalent certain companies are in our lives and have on multiple occasions commented to the family that we own that company’s stock.
In addition, I have made it a habit to pay more attention to the products and services that we use on a regular basis as some companies–primarily in the consumer staples and consumer discretionary sectors based on my experience–have a multitude of brands under their umbrella.
Earlier today I was sipping on a Sparkling Ice flavored water and was inspecting the bottle, where the following caught my eye:
As in life, chill for best results.
While the company in question, Talking Rain Beverage Company, is a private company and therefore not owned by one of my existing holdings, the quote really rang true to me.
Particularly in light of the volatility we have seen in the market recently.
Chill For Best Results
Over the last week or two, I have seen quite a few people on Twitter or in Facebook groups that seem to be extremely anxious when the market has dropped by 1-2% in a given day.
“What the heck is happening to XYZ?”
“I don’t see any news, why is ABC dropping?”
“QRS is down since I bought it. Should I sell?”
In both good markets and bad–although I would probably say it is even more important when things are getting dicey–it is important to chill for the best results.
Before investing into the stock market, you should hopefully have devised a strategy that you would be following. When the stock market declines and people begin to panic, it is critical that you remain true to your strategy. Don’t panic and sell your holdings simply because the market has declined and you’re feeling inundated with headlines and stories of doom and gloom.
Now, that isn’t to say that you should just blindly follow your strategy as it is okay to reevaluate your strategy and adjust as necessary.
But don’t panic.
Chill for best results.
Maintain a level head and continue to evaluate your holdings. Unless a company has had a significant change to their business and/or fundamentals, declining prices can be a great buying opportunity as opposed to a time to sell.
Make no mistake, there will be times to sell a holding as well. However, it is important that you are making those decisions rationally and in alignment with your strategy and not as a reaction, or more aptly an over-reaction, to the market headlines.
Things May Get Ugly
Based on the reactions that I have seen across social media with the recent volatility, I will admit that it has caused me some concern on just how bad the next bear market may be.
It is easy to say that you will not panic and that you will continue to hold in a down market. However, saying it and doing it are two different things entirely–and part of my concern is that there is a large number of people that are investing today that may not have been investing, or had minimal funds invested, during the Great Recession.
When you see your account value drop by $15k, $20k, $25k or more in a single day, will you have the resolve to remain true to your strategy?
I am hopeful that more people are able to say yes to that last question, however informally measuring the responses after a 1-2% drop in a day leads me to believe that I might be too optimistic on that front.
The one thing that I would like to leave you with is to resist the tendency to succumb to panic and uncertainty.
Things may get rather ugly and you may lose significant amounts of value in your portfolio, and despite history not being a guarantee of the future, we have seen that the stock market has demonstrated a repeated resiliency to not only recover but continue to increase.
Over the weekend I saw a post proclaiming that the next bear market would lead to the demise of the world market and all currencies as we know them today, and people would lose everything.
Could it happen? Well, I suppose anything could happen.
However, my advice would be to chill for best results.
12 thoughts on “Chill For Best Results”
You raise a great point, DivvyDad. As difficult as it will probably be to endure my first bear market, I believe that ignoring the noise will guide me through the turmoil. While I’m not one to completely ignore criticisms of the market, I am one that refrains from involving emotion in my investment decisions whenever possible. I’ve also found that the dividends that we receive are a major incentive to stay in the financial markets.
Thanks Kody, and that is great that you’re able to remove the emotion as much as possible as that can be very difficult to do. In good markets and bad, you need to take things with a grain of salt and continue to do your own due diligence. And you’re right that those regular dividend payments help soften the blow of a declining market.
There is a lot of wisdom in the things you say here. There’s a lot of noise out there. It’s also true (to which you allude) that most anyone below the age of 35 has never experienced a meaningful longer term decline in the equity markets while having meaningful sums invested in those markets. Not sure what will happen or when, but the market will go down and people will react by selling. That’s why the market goes down. It won’t be any different next time around. Only the circumstances will change. One of my favorite sayings is “have the courage to do nothing” And some day it will take our courage to do just that.
Very well said Tom, that is a great saying. Thanks for sharing!
Wise words, especially given our current market environment. It’s difficult to stomach some of those big down days and see the paper losses mount, but it’s part of the journey. Hopefully, everyone who has started down the DGI path knows that such times will come. Being mentally prepared can help one stick to his/her plan, navigate the rough investment seas and reach the destination.
Thanks ED, it definitely is part of the journey and I think it was Mike Tyson that said something to the effect of everyone has a plan until they get punched in the mouth. My hope is that people, myself included, can and do stick to their strategy and weather any future storms.
haha interesting, just chill and relax
Ive never experienced a massive market dip but lost quite a bit in the last month. For me its good to see, the wife hates it though.
Market dips generally all stocks in the portfolio go down, the ones that bug me are just individual stocks tanking. lol they make ya think a bit.
I remember tawcan talking about buying cdn banks at 26 bucks… Man i would love that…
I think a market crash would make me not chill though. I think im gonna try to grind as much as i can. Got to fuel those cheap dividends.
Yeah it is never fun to see the market go down like that, and I think people do their best to hang tight but sometimes that doubt of “what if things don’t bounce back this time” and they bail at the worst times. During 2008/2009, I remember a lot of co-workers that eventually sold all of the funds in their 401(k) because they thought they would lose it all and stopped putting new money in. Oops!
It can definitely test your resolve, but it really is the best time to buy as long as you are still evaluating your decisions and investing in strong companies. I’m right there with you on the grind and doing what I can to keep feeding that dividend machine!
Great article DivvyDad. You’re right and said it best here: “The one thing that I would like to leave you with is to resist the tendency to succumb to panic and uncertainty.” Twitter was crazy during the market crashes and it was hard to keep track of all the stocks that were decreasing. But if you understand your investing metrics, what makes you tick and want to buy, and keep a level-head in these situations, you can really find some value.
I love it. Just chill. We all need to remember that at every moment of our lives too, not just with investing. Take care.
Thanks Bert, as I was writing that I was reminded of another sentiment that I have really tried my best to adopt and that is “don’t sweat the small stuff”. There are times in our day to day lives, and not just when it comes to finances, that we think something is so important but at the end of the day is rather insignificant.
When the market started to decline I was seeing both Twitter and a few Facebook groups going nuts. I think people have become to accustomed to things just going up that a small correction caused a lot of people to freak out. Fortunately I know a lot of us were able to capitalize with new purchases!
Good advice! Especially as market volatility continued this week.
I am a firm believer in sticking with an investing strategy as well, and I think it’s best written down for future reference. Emotion is one of the hardest challenges to overcome in investing but if investors can stick to a plan they are usually much better off.
Absolutely agree with you there, and I know that when I was younger I really struggled with the emotions involved with investing. Fortunately I recognized it at the time, and that was in large part when I shifted to index funds as my primary investments. Now that I am older, err wiser, I feel that I have a better grasp on checking my emotions at the door.
I also share your sentiment about having things written down as consistent reminders. Thanks for stopping by and sharing!