The stock market entered correction territory last week. The Dow dropped over 1,000 points on two separate days. Even on Friday it was a bumpy ride. At lunch time we were down 500 and by 4pm we were up over 300. According to analysts, the correction had to do with rising interest rates and a market that might have been “too hot”. After periods of euphoric buying, stocks eventually fall back down to earth, even in a decent economy. The jobs report released just over a week ago showed a healthy job climate and rapidly rising wages.
So essentially, the economy is doing very well. So much so employers need to shell out higher salaries to attract the right people. Unfortunately, as wages rise, these same employers look to make up the costs by raising prices. This creates inflation and has the potential to slow down the economy. Even so, this has been a fantastic earnings season and the fundamentals of the economy remain intact. And if the economy does slow down, these are normal business cycles. Grow, contract, and recover. With that in mind I took this as an opportunity to buy.
I added 12 shares to my position in Apple at the very end of January. After the market dropped another 1,000 points I added to my positions in BNS and UPS. I invested $1,000 in each. And while it was a bloodbath in my portfolio the damage was somewhat contained. Because of my leaning towards consumer staples the portfolio dropped half as much as the general market. Overall I viewed this correction as a tremendous buying opportunity. If the market drops further I will be accelerating my purchases.
A dividend investor seeks out yield, growth, and stability. If a dividend is high, covered, and growing, then who cares about a little market fluctuation? Many of us have been sitting on the sidelines only investing small amounts. Cash holdings continue to get eaten away by inflation. But when the market collapses in the face of SIGNIFICANT earnings growth it may be time to get off the sidelines. More importantly, corrections are healthy and happen all the time! The key is not to panic, focus on the fundamentals, and view this as an opportunity.
DISCLAIMER: I am not a licensed investment advisor or tax professional. I am not liable for any losses incurred by any parties. This blog should be viewed for entertainment and/or educational purposes only. Any transactions published are not recommendations to buy or sell any securities. Please consult with an investment professional before making investment decisions.