Build Your Foundation of Dividend Stocks When the Market Drops
We may earn money or products from the companies mentioned in this post.
As I logged into our Robinhood account the other day, the first thing I noticed was a lot of red. One of the nice features of this zero-cost broker is that it uses green and red colors to denote gains and losses through their app. Green is used to show gains, while red is used to show losses.
So the more green an investor sees the better. Unfortunately, my screen showed a lot of red. Not just for the day or month – but for the entire year!
To date, my wife and I have invested $6,668.63 for the first 6 months of the year through our Robinhood account. These funds were invested into shares of 7 different dividend paying companies.
Over the course of the past 6 months, our portfolio has declined in value by ($231.31) or (3.47%).
- Total Invested – $6,668.63
- Total Loss – ($231.31)
- Percentage Loss – (3.47%)
From looking at the numbers above, it certainly was not the best start for the first half of the year for our stocks purchased through Robinhood. The recent market declines over the past month and a half have basically wiped out any gains from the first quarter of the year.
Note – The numbers above are reflective of the close on June 30th – half way through the calendar year.
While some investors may panic, we are standing strong with our investment decisions.
The Good News
Despite seeing all the red lighting up our Robinhood account, there is actually some really good news in all of this.
Even though there have been recent declines in the market, my wife and I are not panicking. In the past, there was a good chance we may have gotten scared and sold out to avoid any larger losses. That is not the way invest today.
By using our 8 step process for selecting top dividend stocks, our comfort level of the companies we own is strong.
Despite recent weakness in the overall market, we know that the companies we currently hold will be prosperous in the long term.
The key here is long term. Stock prices may continue to decline for a while. Who knows? I certainly don’t. But if they do, it is a great time to buy some wonderful dividend paying companies on discount.
We are not worried about what happens to our stocks or the market in the short term. As long as the companies are generating cash and using it to payout dividends and grow them – we are completely comfortable with a 3.5% decline in value.
Instead of looking at our Robinhood account and seeing a bunch of red, we are using this opportunity to invest even more money into the market.
Even Better News
Buying top quality dividend stocks at a discount is great but there is even more to like.
The even better news is that while the market is busy going up and down, we keep getting paid no matter what. As long as the companies we own maintain or raise their dividends, then we are generating income from owning these companies.
Guess what? We can’t earn dividend income sitting on the sidelines. Sure I would have been happy to pay a lower price to own the stocks we bought over the past 6 months. But there was never any guarantee that the stock prices would drop and if they did – then for how long?
Instead of waiting for a correction, we screened for stocks that we wanted to own and purchased shares in them. And since that time have been earning dividend income along the way.
Since the beginning of the year, we have increased our 12 month future dividend income by $306.35 from these “red” stocks we own through Robinhood.
Not investing at all certainly would not produce $300 in dividend income. Nor would freaking out when the market declines and selling those stocks.
The dividend income that we will earn over the course of the next 12 months will certainly offset the $231.31 decrease we have seen in the value of our shares.
Wow – that is a very powerful reminder of the importance of investing in quality dividend stocks.
Even though we are down by 3.5%, our yield on cost (4.375%) can more than make up for the difference!
No investor wants to see the value of their assets decline once they purchase them. Whether it be the value of a home you recently purchased or shares of your stock declining in price – seeing all the red can hurt.
Fortunately for dividend investors, there is generally no reason to worry about declining share prices. Since the losses are only on paper, there is no need to worry about the short term ups and downs of the market.
Successful investors will use these dips to add to their solid foundation of dividend producing gems. That is our plan as well. Keep buying top dividend stocks at discounted prices!
What kind of investor are you? Do you get excited when the market drops and you can load up on discounted stocks? Or are you more prone to panicking and selling out of your positions?