The market right now is very volatile. There is concern that we might experience a 20% or more decline in the market resulting in a bear market. Indeed, in looking at my own dividend portfolio, I’ve “lost” about $4000 in portfolio value. I put “lost” in quotes because I didn’t actually sell any of my investments and so it’s really just academic at this point. For other investors, especially those who are in retirement years who rely on the sale of their investments aren’t so lucky. But for those of us who are pursuing the dividend growth investing (DGI) strategy, there’s one thing to remember: even though the value of your portfolio might decline, you are still building shares.
Building Shares Example
Let’s take a look at Johnson & Johnson (JNJ) for example. There’s been some recent negative news on the company right now about its baby powder product. The New York Times recently published an article entitled Johnson & Johnson Loses Bid to Overturn $4.7 Billion Baby Powder Verdict. Now, in part because of this issue, the stock price has been declining. As of this writing, the current price of JNJ is $122.84. A month ago, it was at $146.90, and on January 15, 2018, the price reached as high as $147.36.
When I started this blog, I started to invest in JNJ. Even when I recently reduced the minimum contribution to my dividend portfolio, I never reduced the contribution I was making to JNJ. The point though is this. Despite the fact that there has clearly been a reduction in price in JNJ, there has never been a reduction in the number of shares I own. I keep building shares. Let me repeat that. There has never been a reduction in the number of shares I own!
In my opinion, this is important. I believe Johnson & Johnson will recover. While there is a decline in the market price today, I am able to buy stocks cheaper than I was before. Even if a bear market turns into a recession, or otherwise lasts for an extended period of time, my shares will continue to increase. That’s because I have a long-term investment horizon. Quite frankly, I also expect my dividends will continue to increase, but that’s a topic for another day.
Bear Market? Recession? Bring It On!
It's certainly possible that we might end up in a bear market soon. Check out this recent Bloomberg article entitled, US Stock Futures Slide as S&P 500 Verges on a Bear Market, by Sarah Ponczek. I don't know what's going to happen and quite frankly, no one does. But, whether we end up in a bear market, or worse a recession, I know that as long as I am contributing to my portfolio, the number of shares will continue to rise, and perhaps at a faster rate as the stock price declines.
I don't mean to come across as insensitive to anyone who is relying on the stock market for income. A bear market can sometimes be a scary thing. But it can also be an opportunity for DGI investors to acquire even more shares at a cheaper price. That's the benefit of dollar cost averaging and pursuing this investment strategy.
One final point I would like to make is that it's important to not just invest blindly. An investor should continue to do due diligence to ensure that the stocks they are invested in still makes sense. If Johnson & Johnson's price declined all the way to zero, it doesn't matter the number of shares I own. The stock would be worthless. So, the same goes for any other stock in my portfolio.
I hope we all are able to finish 2018 strong and I wish nothing but the best of luck in 2019. But, as we continue to face an uncertain stock market in 2019 (which was always going to be the case), remember that with the dividend growth investment strategy, you are building shares.
Conclusion
I hope you found this article useful. It's sometimes unnerving when we hear so much bad news about the stock market. It sometimes hard to see the silver lining in all this negativity. But there is one, and with the DGI strategy, and consistent with the goals of this blog, it's all about building shares.
I also hope that you had a Merry Christmas and are otherwise enjoying the holidays with friends and family. Happy New Year everyone!
Let me know your thoughts by commenting below.
Great Post DP! I “lost” about $16,000 over the course of the last few weeks in market value, but I am nevertheless optimistic. The dividends are still coming in (and growing) and there are some great buying opportunities now. I plan on making some more purchases over the next 2 weeks (and JNJ is high on my list). Hope you had a Merry Christmas and have a very Happy New Year! 🙂
My Dividend Dynasty recently posted…Setting New Goals for 2019
I hope you had a Merry Christmas and have a Happy New Year as well MDD. I know I reduced my contributions, but I am actively thinking of restoring them back or even increasing them for the new year. It’s gonna be interesting.
Hi Glen 🙂 Yee this price decline is a funny thing. From one had my portfolio now worth less then I bought it, but buying opurtunities are exelent. Sad I dont have such option as you to invest in small amounts 🙁 But still I think I have better options now. Hope for ex. I would like to buy CSCO but I thik it is still on a high side now with 41$ but in mid 2016 it was around 30$ and I would not say that their results has increased by 1/3 by then. Tech stocks has surged more then other in pas 1-2y so I would like to see them going down as well. What relates to JNJ it is almost the same price as I bought my first US stock back in begining of Y2017 for 117$.
Interesting p2035. It is good to see buying opportunities in the market. As for me, I am reassessing my goals and spending habits for the new year. I’m looking forward to participating somehow and hopefully try to take advantage of some of these opportunities.
Like the share decrease as well 🙂 Also as you mentioned JNJ is a good buying opportunity now. JNJ was my first buy in begging of y2017 for 117$. Now it is very near that price. Also I’m looking at CISCO, but their price at 42$ still looks high as it was around 30$ until mid 2016 and CSCO results did not improved by 1/3. I think tech stocks although declined still to high as they surged even more since my mentioned 2016. I would like to see price decline even further. Sad I cannot buy in small amounts as you do 🙁 That would be great option.
p2035 recently posted…Y2018 (Q4) Dividends
I’ll be looking at JNJ myself p2035. Keeping all my options open!
Loss in net worth has been quite painful. I am a little worried. But,like you mentioned with DGI strategy I am feeling better. I plan to keep my losses ‘unrealized’ for now.
Yea. It’s interesting. Today we had a great day in the stock market. Christmas eve we didn’t. Either way, we’re building shares – so long as the losses remain unrealized.
I think thats the only way forward, keep building shares, keep building momentum. I’m feeling excited about the volaitilty since it provides more options to expand my portfolio. Sure the unrealised losses are there, but they actually don’t faze me that much. (never experience a real crash so what do I know) 🙂
Mr. Robot recently posted…This is my buy of December 2018 (so far)
Fair enough. But, fortitude is necessary in times like these. Too many people get scared and sell at the wrong moment. We just have to remember what our goals are and modify our plan as necessary to achieve those goals.
That’s the right perspective. While it’s never fun to see your portfolio decrease in value, while we are in the accumulation phase of our lives we do benefit from the lower prices as each dollar buys a larger number of shares.
I do my best to ignore how much my net worth has dropped recently and just continue to execute my plan of consistently investing and stacking those dividends!
DivvyDad recently posted…Recent Buy :: Redeploying Capital
Yea, it’s important to focus on the right thing and maintain the right perspective DivvyDad. I couldn’t agree more.
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I wonder if there is anyone tracking their net worth/accounts in pure shares? I have toyed with it a couple times over the past few years, but immediately thought it would make me have a bias to cheaper stocks
Evan recently posted…January 2019 Undervalued Dividend Growth Investment Screen and Purchase
That’s an interesting thought Evan and something I might consider doing! Thanks for the suggestion.
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