How do you handle rough performance?

[Dividend Watcher]

Russell,

I just went and looked at your introduction post to see where you were coming from and now understand your angst a little better.

I liked the other replies to your question. Here's where I'm coming from. We've got about 8ish years left before thinking of retirement. We're not wealthy and we're depending on Social Security (in the US) and our IRA's to make it through retirement. No 401(k)'s, no pensions -- just us. To compound it, my wife didn't do a thing about retirement until I took over her meager retirement fund about 5 years ago that she had gotten from a short-term job. Luckily, we had the wind at our back coming out of the Great Recession but it was (as still is) a work in progress building our dividend growth portfolios. I just updated our spreadsheet and a little over a third of our holdings are underwater; all were bought within the last year or so. You can see where we were here.

What are we doing about it? Just following our plan. Contribute as we're able, invest in one of our watchlist companies or add to existing holdings when sufficient cash is available and the price is reasonable, and watch the income stream.

Sure prices have come down a little but it's done the 3-5% drops you mentioned several times in the last 5 years. Maybe this will blossom into a full-blown correction which used to be generally defined as a >10% drop. For myself, I'm looking forward to it. Every dividend that gets reinvested will add to the income stream and the lower the price, the bigger the chunk of dividend dollars I can expect in the future.

So why don't I sell and buy in at a lower price? Well, I already know I'm a lousy market timer. I just bought some REITs and utilities a few days ago and they've already dropped to prices that I would've been much happier with except for the fact that I wasn't expecting them to drop so much so soon. But what if they hadn't and I held onto that cash paying me 0.01% in the brokerage cash account? All of them will pay me a dividend within 2 months on that cash I invested that far exceeds the interest I would've earned.

As I was looking for other links in the this post, I ran across a thread I had started in February of this year. You might also want to read that and check out the link. http://dividendgrowthforum.com/showthread.php?tid=856

You asked ...

(06-08-2015, 10:56 AM)Russellhantz Wrote: And what is the lesson to learn here? That I bought at the wrong time?

In my opinion, no. You're experiencing what Ben Graham and Warren Buffet call "Mr. Market having one of its crazy moments" again. Sure prices were a little elevated but there were & are still some decent companies whose stock was fairly valued. Focus on quality companies and have some patience.

I understand why you'd be a little concerned. That's the nice thing about our little cabal here at DGF. We can help keep each other sane when the worries start to settle in. If you can't sleep at night, take a little off the table. The question to ask then is ... what are you going to do with the proceeds? Do you have a plan for when you're going to get back in? Fortunately, you've got plenty of time to adapt and to make up for any temporary losses.

I'll just add one more quote from my portfolio business plan:

Quote:“That’s not to suggest that people invest cash they can’t afford to put at risk; there’s nothing wrong with taking risk off the table, especially at a time when the market makes you nervous, but if you are waiting for the “perfect” time to be in the market — when you are comfortable, confident and worry-free — you’re never going to find it.”