This week, I posted an article on the Lessons I learned in 2018 and it had some success over the web and on social media! Therefore, I thought about making a short video from it. The market was full of uncertainties in 2018 and even lead to some pitfalls. Still, there are some lessons to learn from this gummy bear market in order to invest wisely in the next year. One of the major keys: a strong investment strategy.
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00:00 Mike Heroux: Hey, fellow investors, this is Mike Heroux from Dividend Stocks Rocks. I hope you’re doing well today. I wanna start the year with this video mostly talking about the lesson learned from 2018. It has been a difficult year, especially last month, on the stock market, both Canadian and the US stock market, where we’re down about double digit. We’re talking about minus 10 or something like that. It’s not really a bear market, it’s more like a gummy bear market, I would say, because now we’re starting the year in 2019, and the market seems to bounce back a little bit. It will mostly depend on what’s gonna happen in earnings in the upcoming weeks. But in the meantime, I think it’s important to take a small pause and see what we have learned from 2018. Because if you don’t learn anything from the past years, it doesn’t really matter if you made money or if you lost money, you won’t be able to improve your portfolio or investment strategy to move forward.
01:03 MH: The first thing that 2018 brought back on the table was that dividend cuts and bad earnings will happen. We have been running through an amazing boom market. The economy is growing, and then most investor forgot that we could run into some errands, we could run into some speed bumps. And then we have companies, like General Electric, Owens & Minor, Buckeye Partners, [01:33] ____, Budweiser. And also on the Canadian side, we have companies like Artis, Areet, Corus Entertainment, and AltaGas, which all cut their dividend, published bad earnings, and went down the hole. So, most of those investments showed a negative return of between minus 40 to minus 60 something percent in 2018.
02:00 MH: I think that the party is over for many companies. Cheap money is not available anymore. Credit ratings are getting more difficult to obtain, and we’re going to see more interest rate rising, so all companies that were just burning cash and not really know what they’re doing won’t be able to simply surf on strong economy tail winds, and going forward, you’ll need to identify those companies. You’ll need to establish a strategy that will enable you to pinpoint which kind of company you want in your portfolio and which kind of company that may cut their dividend or publish bad earnings. Nobody is sheltered from bad surprises, obviously, but make sure that you understand the company you invest in, that the payout ratios, cash payout ratios and debts are under control. Those kind of metrics that you need to follow to make sure that the company will grow going forward.
03:02 MH: Second lesson that we’ve learned in 2018 was that pain generates strong emotional responses. I’ve often think that losing $100 create more pain, that finding 100 bucks on the sidewalk create happiness. In other words, when you see that your portfolio is down 5%, you tend to panic a little bit more and be more angry about the stock market or anxious, then you are happy when you see that your portfolio is up by the same 5%. This is probably why we’ve read so many articles and headlines talking about the bear market, about a potential crash, about the economy that is not rolling as strong as we thought it was. So, all those things coming into play generates major sell-off, especially in October and November in 2018.
04:01 MH: My advice in regards to that lesson is just ignore the pain, ignore the stock market. If you can’t stand to see your portfolio down, just put your statement on the side on your shelf, put it in a box and just wait a few months. Because even if we enter in a real bear market in 2019, what’s gonna happen is you’re going to suffer for a good five to six months. And then, on average, bear market takes about 18-24 months to recuperate. Even in 2018, when the market lost about 50% of its value, it took about two, three years to get back up and then show positive returns. So, if you stay invested and you’d stick to your strategy, you should not be worried about anything.
04:51 MH: And this leads me to the third lesson is, your investment strategy must worth something. If you’re a part of investors that were just riding the bull market and picking up stocks because they read cool headlines or just following people on Twitter or on their blog and just thinking, “Oh, this company looks cool because I read an article about it,” well then you probably get very anxious and you probably suffered losses in 2018, mostly because now that the party is over you need an investment strategy, you need a plan, you need to know where you’re going, you need to know why you invest your money into this company instead of another one.
05:33 MH: My advice for that is write down your plan, write down your investment thesis for each company that you purchase. If you don’t do that, then you’re prone to panic, then you won’t know what’s gonna happen next, and you won’t feel comfortable with your portfolio. Each time I buy shares of a company, I make sure that I do my own due diligence, that I write down my investment thesis, that I go thorough all the quarterly statements and financial analysis I can read on that company to make sure that I know why I buy those shares. And then in the future, I will know if I need to sell them because they won’t match my investment thesis anymore.
06:17 MH: And then final lesson that not something that I’ve learned but something that I confirm in 2018 is that dividend growth investing is the way for me to invest. I’ve published interesting results, and actually positive results, and I’m going to put a link back to my blog down in the description note. You can follow that blog post and read the full article about the lessons I’ve learned in 2018, and about my own investment returns, which are cool because they’re quite positive. And I also invite you to watch a replay of one of my webinars that I’ve done last week about how to invest in 2019 and beyond. So, considering what’s happening right now in the stock market and providing you with tricks and the methodology to build your portfolio and make sure that you don’t suffer stock market pitfalls, and you invest in the right companies. So, check down in the link below and see you next week for another video. Cheers.
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