Stock Investing Will Have its Up and Downs

Stock Investing Will Have its Up and Downs

I started writing a post about dividend investing research and then realized that how could I with good conscious write about anything other than my feelings about the market.  While I love preforming my own analysis I don’t pretend to be an “investment guy” and  that is probably the reason that despite my obsession with my small Dividend Income Portfolio I have most of my money invested in Cash, ETFs and Mutual Funds (index and active).

Additionally, I intend on purchasing more “buckets” as I become more and more established (these buckets are likely to include more whole life insurance, an annuity, real estate, etc.).  While there are tons of resources for one to buy gold coins it is one bucket I haven’t looked into too much yet.

In fact, I am probably too risk adverse for 29 years old, but I digress.

It is likely that once can blame it on the current state of media but it seems that people often lose site of the market in anything longer than 90 day intervals.

Screen Shot Dow Jones Industrial from August 1, 2011 to August 5, 2011

DowJonesIndex 5 Days

Down 5.75%.  Ouch.

Screen Shot Dow Jones Industrial from July 5, 2011 to August 5, 2011

DowJonesIndex 1 Month

Wow Down 10.02%

Screen Shot Dow Jones Industrial from May 09, 2011 to August 5, 2011

DowJonesIndex 3 Months

Down 9.45%

Screen Shot Dow Jones Industrial from January 3, 2011 to August 5, 2011

DowJonesIndex YTD

Wait, a minute only down 1.15%?

Screen Shot Dow Jones Industrial from August 9, 2010 to August 5, 2011

DowJonesIndex 1 Year

Up 7.43.

My Point?

You should know and understand your risk tolerance, and be involved in equities with the knowledge that down turns and periods of stagnant growth are not only known risks but actually expected from time to time.

Update: Monday August 8, 2011 9:30am the moment before I am going to publish this post: Market is down another 200 points to around 11,200ish.

All screen shots taken from Google Finance. Picture by Clover_1.

39 Responses to Stock Investing Will Have its Up and Downs

  1. I have been selling off all of my non-dividend paying stocks for awhile now and switching them over to dividend stocks. My risk tolerance has certainly lessened over the past few years.

    • I think we are part of an entire generation that is risk adverse. There were decades with no corrections like we have seen 3 times already!

  2. Insane. Definitely shows that buy and hold investing trumps market timing. But I stopped buying in May and I’ll be back in maybe a few weeks or a few days, depending on the fundamentals. Things are still just a little too uneasy for me.

    • I don’t think I have the testicular fortitude to stop buying. The kind of conviction it takes to stop buying or to exit the market 100% really does impress the hell out of me!

  3. Good post. Getting a larger perspective on the market can always help to ease your fears. Obviously, the news and financial media is not going to show you all of this because they make their money on the fear….fear turns ratings, ratings make them money.

    Good luck!

    • CNBC must be a goldmine the past couple years! I wonder if there is a place to look up the profitability of that channel.

  4. Investing is supposed to be for the long term (more than 5 years), but the volatility in the last couple years make you forget that! Your asset allocation should reflect your risk tolerance which may require a little tweaking after this.

  5. That stuff makes my stomach turn, but I’ve just got money invested in broad index funds, so I’m riding it out. If I had individual holdings, I’d look closer.

  6. I think the media is secretly planning a financial take-over. They keep focusing on driving fear up to average investors, basically controlling behavior that drives prices down. The Mr. Media will buy up all the cheap stock, let it rise, then sell. Then the cycle starts again.

    This might be a better way for Mr. Media to make money than selling commercials and ads. Maybe I’m on to something?

  7. Couldn’t agree more. Buy and hold is all I am comfortable with. Trying to time the market would make me crazy. Might as well go to Vegas. Especially in these crazy times.

  8. I guess because I’m buy-and-hold I’m extremely risk-tolerant. Every time the market crashes, I think, hooray, more shares in this month’s 401(k) purchase!

    • How annoyed do you get when the 401(k) contribution goes in after a short term rebound? I feel like the weeks that the market gets hammered are NOT the weeks I get paid/contribute!

      • Not a whole heck of a lot. Honestly I’m really in this for the long haul. I enjoy checking the 401(k) web site and seeing that I have enough to buy a really nice car for cash, especially since I have no debt so it’s all net worth, and I think it’ll be cool if I hit a million and can legitimately call myself a millionaire, but really I’m just working for retirement with plenty of cushion. If I kept saving at my current rate for the 32 years till retirement, and the market goes up at 7%, then in retirement I switch to a safer 4%, I’ll take in about $70K a year, and right now I’m living comfortably on $48K. If things go really well, early retirement.

  9. For the heck of it, I checked out a dividend ETF DVY. I would have expected it to hold up better than the market as a whole (SPY), but it lost just about as much over the prior 5-day, 1 month periods. I tend to think of dividend stocks as being less volatile and buttressed by those attractive yields… but alas, not always the case!

    • I have never researched it, but if I had to give a guess when things are bad DVY doesn’t drop as much (maybe in longer terms than 5 days) but when things are 1999 amazing DVY wouldn’t go up as much.

  10. Good post… what you are really pointing out is not the risk of stocks as much as the risk of a particular stock strategy. Unfortunately for years investors have been told “buy and hold.” Some have even been told to “buy the dips.” What’s so unfortunate is that from 2008 until now, many of those investors who hung in there are just breaking even… that is until last week. And now, if they “hold” they’ll just be set back again.

    Oh, and by the way… remember, not every stock that dips rises again… I’d rather buy the winners. Just my two cents.

    • So you are an active investor? I wonder if there are more active investors (not active in terms of Mutual funds, but individual stocks) now or in 2000?

      • I suppose Evan. Really, an investor only needs to take about 15 minutes a week to be successful. I created a Weekend Investor Strategy that works well and has proven successful in bull and bear markets. You can always take a look at my website if you have specific questions.

  11. Thanks for sharing the visuals. Definitely puts some things in perspective. I’m glad I have only a couple different stocks at moments like this. I’m not sure if I could handle the heart attack feeling some of my friends are dealing with.

    • Jenna – these markets are one of the worst times for me but not for why you might think. I’m profiting by using a few strategies for investin in uncertain times I posted a couple of weeks ago. But why I hat it is because, as you mention, people are getting hurt by these market conditions but there’s no need for it. Please pass the word to your friends – there is no reason to lose money in these markets.

        • Just click on my name for further details if you’d like.

          I’m so very concerned about investors who lose tremendous amounts of their capital when the markets drop. There’s no need. And losing that kind of money so quickly can really hit people at their core.

  12. My value portfolio is still hanging in there.

    I get the whole “hands off” thing, and I totally dig your point with multiple charts, but how anyone can just plow several hundred/thousand dollars a month into the market and just wait it out is beyond me. That takes real balls of steel.

  13. It’s definitely been a wild ride over the past week! I’ve tried not to pay too much attention and invest more when possible.

    I’m curious about the selection of possibly investing in an annuity. That’s something that’s been on my radar if I had a little more money.

    Any thoughts on how you’d proceed with that? What provider you’d use?

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