Thursday, April 26, 2018

Recent Market Volatility

With all the recent market volatility I wanted to quickly share my thoughts on the matter. It can be very hard and very stressful for an investor when the market is volatile. If you have a lot of money invested you may cringe when the market drops and the value of your money drops with it. However, dividend growth investors should welcome market volatility with open arms. 

Why do I say this? 

In terms of the history of the stock market - every drop, decline, recession, weakness, etc. has always been followed with an up tick in the overall market. If you had bought into the overall market 5, 10, 15, 20+ years ago then you would understand this. For first time investors this can be a difficult thing to process. If you invested in January of 2018 only to see your money drop the following months you may swear off the market and sell at a loss. However, investors need to have patience with the market. Patience can be a hard thing to come by though, especially in our fast paced world.

Many people are afraid of the stock market for these reasons. The news channels and networks try to strike fear into people and they use buzz words to make it sounds like these market drops are so terrible. They talk about "biggest drop since..." or "the market fell sharply" or "$ billions in market cap have been erased"

This is all because the news outlets knows what sells and people see these words and continue to watch and listen. If you are a long term investor you really shouldn't have anything to worry about. These periods of weakness offer great opportunities for investors to average down. If you can take advantage and buy stock during these periods of weakness then you can effectively make your money go further and decrease the time to retirement.

The one thing about dividend growth investing is that I never really intend to sell stock. What I mean is that I'm not going to build up a large sum of money in the stock market and then sell off my shares and live off the profits. Many people in retirement do just this and that's why they care if the market drops significantly or not. Can you imagine retiring in January only to see the market drop for the next 3 months? It wouldn't be a great sight that's for sure. 

That is why I really love dividend growth investing though. In these 3 months of market volatility not one of my stocks has cut or reduced their dividend. In fact I've had a plethora of stocks actually raise their dividends by 4% or more! These are stocks that have seen their prices reduced significantly and that means their yields have gone way up. 

There are so many stocks that are now undervalued in my eyes. A lot of these stocks are in the consumer goods section. I believe stocks such as Kimberly Clark (KMB), Johnson and Johnson (JNJ), Proctor & Gamble (PG), 3M Company (MMM), The J.M. Smucker Company (SJM), General Mills (GIS), and The Clorox Company (CLX) are just a few of the great companies that are currently on sale. 

They all offer tremendous dividends and most of them have increased their dividends recently. Their stock prices have taken a beating and their yields are at all time highs. It is really hard to imagine these companies not existing 5-10 years from now since they provide such essential products that are used every day. 

I'm continuing to buy and I hope the market continues to be volatile while I pick up shares at a discount. Investors (not just dividend growth investors) should welcome weakness with open arms. Dividend growth investors will see the yields rise and get them to financial freedom that much sooner. 

The only caution I would have is to not invest a large sum of money at once. This is because no one really knows which direction the market is going to go. It could drop more or it could push forward to all time highs. My best advice is to always be investing. If you can invest 1-2 times a month at a lower amount then you will catch the market at its highs and its lows and eventually the market will go up. 

What do you guys think? How do you handle market volatility?



  1. Amen Millenial Dividends, Amen. Learning to not be fearful when the market becomes volatile is not easy. But when you do, you will realize how many great opportunities are in front of you ready for you to take advantage of. Why I like Dividend Growth Investing is the focus on the long-term growth of a company's dividend. I focus on company's that have increased their dividend through all kinds of economic cycles. Busts, booms, busts, recessions, etc. So that way, when there is a sudden drop, it doesn't scare/phase me and I'm ready to strike.

    But to answer your questions, I handle the volatility in the exact same way.



    1. Hey Bert thanks for stopping by! Yes, these companies continue to pay and raise their dividends so I'm really not worried about the price of the stock. It makes for incredible buying opportunities and there are a lot of great companies paying north of 4% right now which is awesome.

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