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Friday File: Dividends Keep Climbing

By Travis Johnson, Stock Gumshoe, December 13, 2019

It’s “goodwill toward all” season, right? So now is the time to get ready to be nice to yourself.

I don’t know whether this trade war will end, or if impeachment will lead to something bigger, or whether President Trump will find a way to goose the stock market again next year to boost his chances for re-election… but at some point we’re almost certainly going to transition from this bull market to a bear market (no one knows when, or for how long, which is why we prepare a little bit but don’t bet on the timing), and that transition tends to cause significant emotional and psychological strain for people who are actively involved in the stock market. If you’re trading at all, you’re going to make a lot of buys and sells during the transition that look terrible and make you feel terrible, even if (as is typical) the bear market doesn’t last all that long.

So prepare yourself… and be ready to give yourself a break. Thinking ahead of time gives you power, because when it happens you can say, “ah, well, it had to come sometime” and move on, instead of chasing the mistakes you’re making with more mistakes.

During a bull market, the short term feedback loop of the market tells you that every single time you sell a stock it’s a mistake… during a bear market, every single time you buy a stock it’s a mistake. It weighs on you, and it can cause paralysis (I’m sure most of you have been there, I definitely have — many people took their money out of the market in 2009 and still haven’t gotten back to being fully invested, missing out on tremendous gains because they couldn’t face the chance of more of the pain that the 2008/9 crash caused).

That means today, before that bear market hits, it’s time to get ready for the emotional toll that will probably take — but also to set yourself up to succeed through that next bear market. Focus either on being a steady buyer no matter what and sticking to a reasonable investment plan (ie, doing the smart thing and putting $X into a globally diversified index fund each month), or on studying up on specific companies so that you can be an informed owner and build up a comfort level with the prospects ...

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