On Sale

Paul Durso Academy

Its a bad thing when the market goes down right? In my opinion the right answer would be, it depends.

When Its Bad

A downturn in the market is only a bad thing when the investments you own need to be sold. If you are receiving dividend or interest income from your investments and do not need to sell anything to get income, then downturns in the market may not hurt you long term. If you need to sell investments to generate income, then downturns are very bad.

If you don't need income but the the investment in your portfolio are quality investments, then again a downturn in the market may not hurt you. The stock price fluctuation is not a good reason to make a sell decision. The stock price can fluctuate for a lot of reasons and sometimes you should pay attention. I would say that most of the time you should not be concerned with a stock takes a downturn. With that being said, This is one of the reasons that investing is so hard, because when do you know when you should or should not pay attention?

When Its Good

A downturn in the market or a stock that you are holding can be a great thing if you are holding a stock that pays a dividend. Why? Because you can buy more shares of that stock as the price falls. Now, it is important to state that quality stocks lose value when the stock market turns downward, but that does not mean the stock is going down in price because you should sell. Sometimes stocks fall because stocks fall. The company may be having a record year, but the market is pulling it down. That's how it goes sometimes.

The perspective you should have would be one that when the stock market goes down and you know that you are invested in high quality stocks that are paying dividends, you get to buy more of that stock on sale!

I don't know about you, but I love to shop on sale. I would much rather buy things at a reduced price than at a premium. When your stocks go up, that's great, but that also means that when you reinvest your dividends you are paying a premium to by more shares.