With the holiday this past weekend, I was busy with different family meals and gatherings of extended family. Within my family, it is common knowledge that I wrote a couple books about stock investing.
For this reason, many family members often like to ask my opinions on different things finance related.
What’s a good stock to buy? What’s your best stock tip right now? What was the last stock you bought?
Just to be clear, no question is a stupid question and I’m extremely happy to have questions so that I can try and help people become better investors.
However, sometimes it’s difficult to answer because it would take a long discussion where I want to fully detail out my investment strategy and how everything works.
Well, this past holiday weekend I had another question.
“What do you think will happen to the stock market when they stop quantitative easing?”
I Don’t Even Care
This question is hard for me. Because honestly, I don’t care.
And that is not the type of answer people expect to hear from me. I’m supposed to be the expert!
But to be honest, I have no idea how stocks and the stock market will react. Nor do I really give crap.
I’m an investor. I’m not a stock trader. I don’t buy and sell stocks on a whim or based on some short term news.
The truth is, stocks will go up and stocks will go down.
In fact, I wish I would have answered the question with “Stocks may go down, but they may go up!”
Over the long term, I’m a firm believer that if you are investing in the best companies that grow their earnings and dividends, you will do well as an investor.
Short term economic news or actions does not affect my thinking.
For me, I worry about the government stopping quantitative easing as much as I worry about the unemployment rate, the housing market or short term stock market movements.
In other words, I don’t worry about those things one single bit!
Ignore the Short Term Noise!
When investing successfully, you need to learn to ignore the noise. Over the short term, the markets will move with the news. Over the long term, the markets will move with earnings growth.
As long as the companies you invest in continue to grow their earnings over the long term, you will come out ahead.
If you are buying for the long term (20, 30 or even 40 year time frame), then short term market news and movements don’t matter.
I’m still around 30 years away from retirement. I’m still building up my dividend growth stock portfolio. If markets tank tomorrow, I honestly don’t have a problem.
In fact, that would be an opportunity for me to load up on some great dividend growth companies at some great prices.
By following a strategy to Retire with Dividend Growth, I won’t even have to worry too much about market movements once I reach retirement.
This is because I will be living off of the dividend income from the companies I own.
As long as those companies continue to grow earnings and thus grow their dividend payments to shareholders, then the dividend growth retiree will be perfectly fine.
Yes, stocks could drop 50% over the next year or two. And yes that may sound bad and would be bad for those in or near retirement that is counting on that money.
However, for others, a big drop in the market is an opportunity. An opportunity to load up on more stocks at great prices.
And a well diversified portfolio should hold up fine over the long term.
When the economy went to hell back in 2008, most likely if you had a well diversified portfolio of dividend growth companies, you came out just fine a few years later.
You would have experienced some big losses. As long as you didn’t sell, those losses would have been unrealized and you’d have gains by now.
You may have experienced some dividend cuts. As long as you owned 20 or 30 companies within your portfolio of the best dividend growth stocks, it is unlikely that more than a couple or just a few of your companies were forced to cut their dividend.
The Key To Success
Overall, by following a dividend growth investing strategy, you don’t need to worry about short term economic news, economic actions or market movements.
Continue to buy and hold quality companies for the long term. Continue to collect a growing dividend income year after year.
Ignore anything else. Focus on your companies and focus on the long term.
If you do those things, you will be a successful long term investor.
If instead you allow yourself to become distracted and worried about things such as the government stopping quantitative easing, then I can almost guarantee that you will end up losing money.