Category Archives: Investments

Another Big Stock Market Dip, What Did I Do?

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Yesterday, the DOW stock market measure dipped 187 points, so what did I do?

I did nothing!

The market responded to something going on over in the Chinese government as they try to control inflation in China.  I’ve seen similar announcement like this before, the market drops like a bowling ball dropped in a toilet, then during the following week,  it recovers its losses.  In some way it’s like a broken record…

What I should have done was buy more quality stock or other investments while the market was low, but I froze.  I actually have money sitting. waiting for such a dip, but it’s hard to take that leap of faith, and I hesitated.

The market also took new about Walmart sales dropping slightly for same store sales.  But like last year and the year before that, it’ll be the day after Thanksgiving and the amount of shoppers out in the market on that day, that will determine if holiday sales are boom or bust.

I’ll admit, part of the reasons I hesitated was because I didn’t have any particular stocks that I wanted to buy.  The reason I didn’t have any stock that I was looking at, was not because of any stocks per se, but instead because I hadn’t really been following the market as closely as I usually do.

If I had done my homework, and had a stock lined up…  I might have jumped in.  Even with a stock lined up though, it’s still a hard decision when the forces that be are knocking the market down like a UFC fighter (like the old version of Chuck Liddell) throwing a knockout punch.

Most of us follow our hearts and stay put in such market downturns, or even worse sell shares…

Was anyone brave enough to jump in yesterday?

-MR

Multiple Purpose Stock Dividend Investment Funds

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All of my stock dividend investment funds are multiple purpose investments!

By multiple purpose, I mean that while the dividends from funds may be primarily designated for one specific purpose (like paying for lunch out with the guys at work) in good times, if bad times come along (say suddenly I’m laid off), those same dividends could be used for a second or third purpose, depending of the magnitude of the bad times.

I don’t talk much about my regular dividend investments, but eventually I would like to have dividends funds that could pay for the following purposes: vacations, Christmas gifts, eating out, etc.

Now I know what people are thinking.  If I spend all the dividend money on the entertainment list above, the fund would be never grow and lose ground to inflation eventually.  That’s true, but I’m still going to be investing the money from my job into them; I want the funds to continue to grow!

So while currently the purpose of most of my stock dividend funds are for entertainment, they also have at least one other purpose that I keep in back of my head at the same time.  It’s my “Oh crap, that happened” fund purpose, where I can use the funds for the unforeseen events and emergencies!

I also have other “special designated” levels for my dividend funds, but you get the basic idea…

So if an emergency does hit, I can use these “specific target” dividend fund for the following:

  • Vacation Dividends Fund – would go for real estate taxes and groceries
  • Christmas Gifts Dividends Fund – would go for groceries
  • Eating out Dividends Fund – would also go for groceries
  • At Work Lunch Dividends Fund – would go for gasoline for my car commute

As I create more and more dividends funds, they too, would have multipurpose roles.

Ideally, I’ll be able to fix the issue that’s causing me to deviate from the intended purpose of my dividend funds.  But being able to use these funds for an emergency backup purpose give them a great degree of flexibility!

Do you have multiple purpose investments?

-MR

My 90% Dip In The Value Of One Of My Stocks

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In the past I was lucky, during the tech bubble  pop, I was lucky enough to be in ebay.  Not only did ebay hold it share price, it double in the 3 years that I had it.  I practically felt like a genius (Note, I not longer own ebay)!

With the “Great Recession“, things were different…  I had some stocks that were in the high beta category.  High beta stocks are stocks that can have wild fluctuations in share price based on the general stock market direction.  One of my worse performing stock dropped 90% in price in 2008!  Just to illustrate what a huge drop that is, if I had $1,000 invested prior to the “Great Recession”, the value of my investment would only be $100!  Ouch!!!  when I realized this, I started to get sick to my stomach, but then I remembered that most of my portfolio is invested in mutual fund and other more stable stocks, not to mention the equity in my house (which took a much smaller hit).

Since my portfolio was well diversified (including asset class), the market downturn didn’t make me worry as much as it probably did with others.  The key is to just have a small percentage of your investment in such high beta stocks (also called speculative stocks) like I talked about in the previous paragraph!  By having asset class diversification, I was able to keep my cool and leave my investments alone so they could recover!  All my accounts are positive again.  My high beta stock is only down 60% and recovering quickly!  I still might use it for tax purposes though instead of letting it fully recover 🙂

How is your investment portfolio diversified?  Do you have all of your eggs in one or many baskets?

-MR

Stock Market Rebalance Opportunity Missed

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Yesterday, I missed another opportunity to rebalance my 401(k) account.  I had this magic number in my head, and once I hit that mark, I swore to myself that I was going to rebalance my portfolio so that it had less exposure to the equity markets.  I was less that $1,500 dollars away from hitting that mark.

So am I going to sell out tomorrow?  No, most likely the market will recover a bit so I’ll hold on.  I don’t know about next Monday though.

I actually like it when the market is a bit choppy for a while, that enables me to buy some more shares at a lower price (dollar cost averaging).  Of course, I still want the general direction of the market to climb upwards…

In my taxable brokerage account, I still have some money on the side, but I’m not in a hurry to jump in, especially so early in the game.

The amounts in my accounts are now much more important to me, I must shift my portfolio so that I am exposed to much less risk in the marketplace.

I will still keep my speculative amount for playing in the market though, but only 10% of my entire balance.

Readers, please consider creating a balanced portfolio (a mix of mutual funds, bonds, and cash like investments) at the beginning instead of just having and agressive equity only portfolio.

-MR

UPDATE: (5/7/2010): Sounds like the problems was worsened by market orders!  This should be a wakeup call to us all that we should always use limit orders when making trades!  The markets still doesn’t know what happened yesterday.  They do believe that with the complex electronic system being used, a cascading effect took place.  I have to wonder if the uptick rule mechanism would have prevented this from happening?  The flaw would still be there, but perhaps the uptick rule would have short circuited the damage.