Apparently we’ve had more stock market volatility over the last few weeks. I don’t really pay much attention to markets but I did find some alarmist headlines and tweets. It does not take much to get investors excited or nervous.
And certainly, over the last couple of weeks, I had many more good reasons to ignore the stock markets. I was on a wonderful trip to the UK with my daughter. Some of the sights were much more interesting than a stock chart.
That’s a pic from Edinburgh Castle looking to Arthur’s Seat that my daughter and I climbed a few times. Interestingly the cannons at Edinburgh castle are more of a prop put in place by Queen Victoria. When she visited Edinburgh Castle she noticed the lack of cannons. A proper castle has lots of cannons so said Her Majesty and according to our tour guide. So the military scrounged around and found some navy firepower no longer in use. Good call Your Royal Majesty, it made for a great shot I think.
And thanks to Mark Seed of myownadvisor and reader Colin Lawrie who both suggested that we climb Arthur’s Seat. They had many other great suggestions as well.
And here’s an image that I think is a little less dramatic, but it caused a bit of fuss. The Canadian stock markets as represented by iShares TSX 60 XIU …
Yes much ado about nothing.
Here’s another (very) concerned-looking individual, courtesy of CNBC.
They even brought in 5 pros to discuss the plunge. That’s a lot of chatter for a non event.
Time to look at a long-term chart. Even a 5-year chart found on that same site can help put things in perspective.
And phew, then things started to look a little brighter. This guy is concerned but we might see just a tinge of optimism.
Yup those stock markets and those stock market makers who price the stocks are certainly once again proving that they are those unpredictable and overly emotional toddlers while the bonds are the adult in the room.
You want your stocks to go on sale
If you’re in the accumulation stage with many miles to go before your retirement start, those lower prices are a great event for your portfolio. Remember, stock market corrections (minor and major) are a normal and expected part of investing. We should embrace those corrections. You might even wish for them.
Here’s a 5-year chart for that TSX 60 XIU.
If you are investing $1,000 per month in XIU and purchase at $23 per share, you’ll be able to purchase 43.47 shares. Those purchases that you made into late 2015 and early 2016 would have allowed you to pick up considerably more shares. At a share price of $17.85 your regular dollar cost averaging would have net you 56 shares. Who doesn’t want 28% more shares? As Warren Buffett will suggest, we like when our shoes go on sale, we should also like it when our stocks go on sale.
Can you wait for these great buying opportunities?
Nope. As we say, you can’t time the markets. There are no market timers on the list of the world’s most successful investors. From my observations the world’s greatest investors are quite passive and quite sloth-like to use another Buffettism.
In the accumulation stage we simply buy on a regular schedule. We have no idea when the next correction might come so we cannot time that fortunate event that allows us to buy at those lower prices. If we wait and keep money sitting on the sidelines we’ll likely miss out – we’ll have opportunity cost.
Mike at the Dividend Guy has been writing about this topic in recent weeks. Here Mike explains why he doesn’t keep cash on the sidelines. He’s all in as soon as possible.
But during times of market corrections keep in mind that lower prices are good for the portfolio. Those lower prices will enable you to enter retirement with more shares. You’ll have more money to spend in retirement.
Don’t fear corrections, embrace them
If you’re a long term passive investor you’ll invest in periods when markets are mostly going up, staying flat and moving down. The market math and history says that you’ll be better off if you simply stay the course and invest on a regular schedule through those cycles.
As I often suggest on Seeking Alpha, you can Ignore Everyone and Everything. And here’s a little something I wrote in 2016 when I was enjoying buying at those lower prices. Going full circle, some of those bigger dividends enabled by those lower stock prices were used to fund that great trip to the UK.
Weekend Reads and Listens
myownadvisor kicks it off with a post with a host of links, including a podcast from Ben Felix.
On the podcast front I was more than thrilled to be the ‘subject’ on CanadianMoneySaver. Thanks so much, Ellen and Lana.
Of course there’s new content, almost daily on Findependencehub.
On Boomer And Echo Robb Engen details why Passive Investing Is Not In A Bubble.
In the case that you want to vote with your wallet Jason Heath offers What the federal parties’ 2019 campaign platforms mean for your money.
milliondollarjourney answers a reader question from a low income senior.
SavvyNewCanadians offers a review of Wealthsimple trade – free buys and sells for most ETFs!
A few of the Canadian Robo Advisors offer some great online resources and robust blogs. Here’s a great post I had missed in August from WealthBar as ETF Robo Investing Turns 5.
Thanks for reading. Have a great weekend. Please leave a comment or send a note to firstname.lastname@example.org