Investing During a Market Frenzy


While being on the road like I am now, I have a luxury that most investors don’t have; I can distance myself from extraordinary events that push the market up or down. To be honest, I was aware of the Brexit decision when the market was about to close on Friday. The best part is that I was about to head out on my trip into the Grand Tetons & Yellowstone Parks for 5-6 days with very limited access to internet. It was perfect timing as I was able to download lots of articles and read calmly in front of the mountains.

The more I read about the Brexit, the more I realized that it was (again) the same thing over and over. And to be honest, in a span of 5 days, everything has been going back to where it belongs:

S&P % level changeSource: ycharts

Since the beginning of the year, I have had a feeling that all we read about is very bad news. Things are not going well, in fact, the economy is terrible. The word recession is everywhere and it seems that nobody is working. Yet, both U.S. and Canadian stock market seems to think differently after all:

market level changeSource: ycharts

Yup… you read it right. After all this bad news, all these terrible things happening everyday, both markets are positive (these results exclude dividend payouts!). Interestingly enough, my portfolio is also on the positive side. Now, I’m asking you; when is the market is about to collapse? Because I don’t see it.

The Market is Crazy, It Doesn’t Mean You Have to Be the Same

Good! So we have successfully determined that the stock market is going up and down for absolutely no reason. Worse, the media is the most pessimistic guardian of the truth you can find. Now, this doesn’t mean you have to follow this course.

Many academic studies show that most DIY investors fail to build a solid portfolio. Forget about beating the index, I’m talking about having a portfolio that makes money over the long haul. Beating the index or not is not the end of the world if you reach your investing goal (such as building a solid retirement nest egg). However, it becomes a problem when the very same studies prove that a lot of investors lose money when they manage their own portfolio. This is probably because most of them are trying to benefit from the market and go in and out at various times counting on their super timing method that nobody had ever found success with before them. Well… guess again this is why they lose money. There is no such methodology to determine a peak or a low and trigger an investing move. However, there are various investing strategies that have been proven to be successful over time.

Dividend Growth Investing will Save you Lots of Headaches

When I read the dozen articles I downloaded about the Brexit and its terrible impact on the world’s economy, I didn’t even spent a second worrying about it. Why?

Because my investing strategy is not based on hectic market movements;

My investing strategy is based on solid companies with solid fundamentals.

Because my investing strategy is not based on special events shaking markets;

My investing strategy is based on growing dividend payments.

Because my investing strategy is not related to a specific group of companies;

My investing strategy is linked to a variety of companies from different sectors.

I guess the best quality dividend growth investing has as an investment strategy is that you will get paid no matter what happens in the market. Since the beginning of the year, my retirement account has generated $820 in dividend income. Regardless if the value of my portfolio is up or down, I did receive this money. This dividend payout is mine. The paper profit or paper loss showed on my brokerage account is surely interesting, but it is not real money until I cash it. The dividend income is real. Therefore, if the stock market goes down for the next 6 months, I will still earn another $820+ during this period. Again, this money will be mine.

And what will happen once the storm is gone and the sky is blue? The paper loss will come back as a paper profit and the dividend payout will continue to appear in my account. As opposed to the investor who’s patiently waiting for the next crash, he earns barely nothing from his savings account and might continue to earn nothing for a while. As I’ve demonstrated earlier in this post, while there is a ton of bad news in 2016, most investors following the market are making money. If you are waiting on the sideline for the next crash, you might be waiting for another 2-3 years.

I can’t do that. Waiting 2-3 years would mean that I’m saying goodbye to so much money earned in dividends. Who doesn’t want to earn money while he waits? This is exactly what dividend growth investing is about; getting paid when the market goes crazy on Brexit stories.

Stop Following the Market Madness – Where to Start?

I’d suggest to get yourself a good cup of coffee on a Sunday morning you have nothing planned. Then, you start your own research to build your investing rules in order to build your portfolio and manage it according to your needs and goals and not according to what is happening on the market. If you are looking for a place to start, you can get inspired by my own 7 investing principles I follow to manage my portfolios. Each principle has been proven by academic research and I have applied them towards 12 portfolios (11 of them are beating their benchmark since 2013). I don’t think I’m any kind of investing genius, I just worked hard to build a solid investing strategy and, most importantly, I follow my principles religiously.

Don’t let the market get to you, you are stronger than that!

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