Now, I’ve had a long and hard talk with myself about investing in stock. Note that I’m in nowhere near an expert in investing , stock market and finances, I’m only writing about what I do and what works and does not work for me personally. I need to have a solid plan, not just randomly buy and sell. I should not look first and foremost at the monetary number, the value of my portfolio, as that can go up and down. If I invest in companies that I want to “own”, I should think of them in terms of ownership and the income it generates being almost like an owner of a company (it’s often said that by owning stock you own part of the company, but technically you own voting rights and the right to receive dividends. Just like when you “own” an apartment it usually means that you own shares in a company that owns the building, and those shares give you the right to use your apartment). When the stocks go down, I should see that as an opportunity to buy more shares for less money. After all, if the value of my own company went down, but I obviously still believed in it and wanted to support it, I would not sell my shares in a panic. I’d know that the fundamentals are solid and that what is going on is not a fault in my company, but general down times as all the other companies are more or less seeing the same effect. Even in hard financial times, while the dividend income may be lesser, it won’t go away, and it will bounce back and then I will have more of the dividend paying shares.
I should invest in companies that I believe in, which products I use myself, and which pay dividends to share holders. What does that look like in practice? It goes like this: “Hey, Fiskars’ share is down like everything else this week. Fiskars makes the best scissors in the world IMHO. It’s an old, solid company and people always need good scissors. I think I should invest in Fiskars, it’s a stock I’d like to own long term. I think I should buy shares for my daughter too, she uses her Fiskars all the time and this is a good stock and company to teach her about investing!” Click click click. Yeay, now I have another good reason to buy a Fiskars knife (which I really need as I own zero sharp knives and can’t even cut carrots until I get a knife..) because I should support the company which stock I own by choosing their products!
Other companies for me to invest in are ones providing for general needs like electricity. It’s better for me to stay away from highly specialized companies whose business I don’t understand. I have invested in initial offering of an ethical shoe company, because I wear and love their shoes and while ethical clothing is becoming more available, it has been very hard to find ethical shoes! Oh, and they have a Star Wars licence. Almost all my shoes are from them. So occasionally I may invest in a start-up or growth company if I really believe in what they are about.
While mine is not strictly “buy and hold forever”-tactic, I aim for less random trading. Which is hard for me as a spontaneous person. (Thus, the real estate strategy!) In the end, the thing I look for is income – how much cashflow I get from my investments as dividends and rent. While building wealth to reach FI, there can be some buying and selling and re-allocating if opportunity arises to make money that way, but it makes sense to buy dividend stocks when they are cheap and hold on to them!
*I started writing this post four days ago. Today the stock market is pretty much red all over. I believe the slide will continue and this is just a start of a crash. I’ve thought for a while that the stock market is in an unsustainable bubble and something is going to pop it soon.
Is it the corona virus pandemic? Could be. I’m mostly out of the stock market at the moment (holding only some high dividend stocks), so I’m just looking with interest at how this will develop. This is a good time to save up, in order to buy when prices will get more sensible.