The Dow gained a couple of points today. Okay… So what!
My Exxon share gained 0,88% today and my Jean-Coutu shares have lost 4,97%.
Great! So what? It’s market noise!
When most people think about investing in the stock market, they think about what we saw in movies… Very anxious people playing their hard-earned money on one single very volatile stock. They think that stock investors are constantly looking at the tape to check the continuous movements of stock’s price to time the right moment to buy or sell.
But, even though I like to see that my stocks have made paper gains instead of paper losses, I don’t really care about their day-to-day price.
Here’s why ;
As a dividend growth investor, my investment horizon is… Forever!
I seek to buy stocks of great companies at fair or undervalued prices. That’s the only time that price really matters to me, because I don’t plan to sell my stocks unless the underlying business starts to go in the wrong way.
I try to follow Benjamin Graham’s saying about price :
Price is what you pay value is what you get.
What principally interests me about stock is the cashflow they generate under the form of dividends. Capital gain is only the icing on the cake. But since I don’t plan to sell my stocks, capital gains are really just increasing the safety of my invested capital.
For sure, if an emergency arises or if a company starts to give signs of difficulties, I’ll be happy that the market price of my shares will have increased over time.
But, most of the time, for me, day-to-day stock price movement is just noise. What other people are saying about what the market will do tomorrow, next week, next month or next year doesn’t really matters to me.
Wonderful companies tend to achieve wonderful results in both bull and bear markets anyway. They also usually use bear markets to buy competitors and gain market shares.
I plan on using bear markets to buy more shares of wonderful companies at better prices.
It seldom happens that shares of great companies like Johnson&Johnson, McDonald’s, Wal Mart, P&G or Exxon sell at a discount of their intrinsic value. When it’s going to happen, I want to fill my tank with their gas and go a long way with them on the road to riches!
Warren Buffett recently said that if you are able to avoid looking at stock prices during week-ends, then you should try during the week. It’s going to already make you a better investor!
Like Mr Buffett, I see shares as part-ownership of businesses. That’s what they are after all. So, as I wouldn’t buy a lousy business to operate it and try to make an income out of it to feed my family, I won’t buy shares of a lousy company not even able to cover its costs.
Unfortunately the stock market is filled with a lot of lousy businesses and they are mostly located among the penny stocks. It is equally unfortunate that many stock market “investors” really are speculators and they consider shares like lottery tickets.
The main difference between these “investors” and me is that they seek capital gains and I seek dividend income.
Lousy businesses usually don’t pay dividends. A company needs to make real money to be able to pay a dividend every quarter and to consistently raise it year after year.
Lousy businesses lose money or barely make enough to stay in business. They usually need high leverage too. Since it is riskier to invest in these stocks, the capital gain generally appears to be more interesting but the price of these stocks is very volatile so your paper gain can become a real loss very fast!
I am a bad speculator and I honestly think that in the end it’s not a game anyone can win over the long-term. Stock prices always come back to the fundamentals of the underlying businesses with time. Great businesses make money and stay in business. Lousy businesses lose money and eventually go bankrupt.
What about you? Are you obsessed with share price or the day-to-day market value of your investments? Do you think, like me, that it’s just noise?
[author] [author_image timthumb=’on’]http://quityourdayjob101.com/wp-content/uploads/2014/03/ID-10050051.jpg[/author_image] [author_info]Hi, my name is Allan. I’m the masked blogger. Like you I’m a modern slave, prisoner of a 9@5 job in Corporate America. They told us when we were young that we would live in a society of leisure and that technology would permit us to work only a couple of hours per day. But we live in a society of stress and uncertainty. My situation could be a lot worse and I know it. So many humans are suffering on this planet. But a golden cage remains a cage anyway. At least, I have an escape plan. I will retire before 45 years old over my passive income. This is a dream that is so powerful that I will make sure it happens. To build my wealth, I mainly invest in undervalued dividend growth stocks. [/author_info] [/author]
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