This wasn’t an article I was planning to write, but a number of emails about my thoughts/concerns on recent stock market volatility prompted it.
I’m going to keep this article as short as I can, which will only serve to reinforce the broader point I’m going to quickly make.
That point is this: the recent stock market volatility, which is unprecedented by some metrics, didn’t even form a blip on my life’s radar this past week.
And stock market volatility shouldn’t only make very little difference to a dividend growth investor’s life in general, but it should make practically no difference whatsoever (good or bad) to a dividend growth investor living off of dividend income.
As a 35-year-old dividend expat who is in a position to live off of the dividend income my six-figure dividend growth stock portfolio generates on my behalf, stock market volatility is almost like an abstract concept that exists on another plane. It has very little relativity to my day-to-day life. Worrying or thinking about the changing winds in the stock market would, to me, be like worrying about the changing winds on Mars.
I’m going to discuss how I personally think and feel (or, rather, don’t think and feel) about stock market volatility generally – as well as more specifically about the most recent volatility that saw the DJIA drop 1,000 points twice in one week.
While many of you readers aren’t in the same position as I am (financially independent and living off of dividend income at a young age in a foreign country), this article should serve as an inspirational and directional template of sorts in your own lives as you march closer to financial independence by saving and dividend growth investing.
Short-Term Volatility Is A Long-Term Opportunity
That headline says it all.
I’ve said it before, and I’ll say it again: short-term volatility is a long-term opportunity. That’s how any long-term value-minded dividend growth investor should think. A lower stock price should improve your long-term total return potential, increase your yield, and lower your risk (relative to a higher price).
As I’ve noted numerous times over the years, I almost always prefer lower stock prices. It would make me very happy to see the broader stock market – and my own portfolio – drop by 10% or 20% from here.
If you like a stock at $X, you should, all else equal, love it at 20% less than $X. This is a no-brainer.
It’s always baffled me how people let themselves get all wound up and affected by stock market volatility. When prices are up, they want to buy. When they drop, they want to sell. It defies logic in any other setting in life. And this is just one reason why most people aren’t financially independent in their 30s.
However, I’m no longer aggressively buying stocks on a regular basis. I’m in a different position in life now than when I was aggressively buying stocks over a six-year stretch (when I was still chasing financial independence).
And so stock market volatility is something that I simply don’t pay attention to or care about (nor did I ever), although I do still prefer cheaper stock prices because it means the very companies I own can buy their own stock back at cheaper prices/valuations.
I Don’t Worry About What I Cannot Control
Stock prices, like most things in this world, are out of my control.
To spend even one second worrying or thinking about what stock prices are doing from day to day would not behoove me at all.
In fact, I view the idea of worrying about things that I can’t control as a major opportunity cost, which limits resources I could better allocate toward things I can control – things that will probably improve my life and the world around me.
Watching the stock market and then reacting in some kind of physical or emotional way is like watching some 24-hour news cycle on what some politician said and stressing out about it. It’s nonsensical.
If people spent less time worrying about things they can’t control, they’d spend far more time maximizing the things they can control.
If it’s not in my immediate sphere of influence, it may as well be on the other side of the universe.
Different News Cycle In Southeast Asia
That brings me to my next point.
Now, this point is a bit specific to being a dividend expat.
I haven’t yet had a chance to bring this up, but I do now.
The news cycle/focus here in Asia is totally different from the USA. And I find it a wonderful respite. I thoroughly enjoy this benefit of living here.
I regularly watch Channel NewsAsia (based out of Singapore), which I can roughly equate to watching CNBC in the States.
Well, here are a few keywords you’ll hear just about every minute if/when you watch CNBC during the day: stocks, stock prices, politics, Washington D.C., chaos, stock market. Every other second, seemingly, it’s an update on the stock market.
Here are a few keywords you’ll hear if/when you watch business news channels (like Channel NewsAsia) here in SE Asia during the day: infrastructure, collaboration, integration, dynamic, technology, long-term strategy. Every other second, seemingly, it’s an update about some tech or infrastructure update somewhere across Asia.
While I was able to mostly avoid the news cycle in the US by not having cable TV for many years, I couldn’t completely escape it.
But I’ve now totally jettisoned that exposure to the constant pumping out of hysteria and mania. It’s quite refreshing. And I think about stock prices even less now that it’s not somehow, someway forced down my throat.
I’d actually say the stress of hearing about stock market volatility, even if you don’t care about it or seek the news out personally, is one of the biggest drawbacks of stock investing in general.
Being able to free oneself of that is phenomenal, as reduced stress in my life is one major aspect of my life that’s helped me lose quite a bit of weight in a rather short period of time and get in the best shape of my life.
If you’re going to be financially independent at a young age, you want a long runway to enjoy that. Avoiding the stress that stock market gyrations may put on you – even if you’re not totally aware of it – is one way to ensure that long runway of a happy and healthy life.
No Impact On My Daily Life
The stock market could be significantly up or down tomorrow.
Would it change my daily life in any way?
Not one iota.
I plan to write an article at some point discussing what an average day is like for me, living as a young, financially independent expat in Thailand.
But I can tell you, regardless of what the stock market is doing, that day-to-day routine of mine doesn’t change too much.
The stock market’s volatility doesn’t change what time I get up, where/when I eat lunch, my usual visit to my favorite coffee shop to write, the mid-afternoon gym session, or anything else in my life. I don’t somehow shower with colder water in the morning. My food doesn’t somehow taste different. The sun doesn’t shine any less brightly. The world continues to turn as it always does. Nothing skips a beat.
Again, it’s like what’s happening on Mars. There’s absolutely no effect whatsoever on what I do or how I do it.
Living Off Of Dividend Income Makes Stock Market Volatility Moot
This is the crux of it, folks.
The only reason I’m actually aware of stock market volatility at all is because I do log into my brokerage accounts every few days or so to tally up my dividend income. Plus, I get those aforementioned emails from worried readers. And I also check things a bit more often than I otherwise would because I still write so much content in the personal finance space. Barring the professional angle, I’d be almost totally oblivious to the stock market’s daily gyrations.
See, it’s that growing dividend income that is the lifeblood of my financial independence. And it’s unaffected by stock market volatility.
To wit, the US stock market last week experienced one of its worst weeks since the financial crisis.
What happened to my dividend income over this same exact week?
It went up!
Four companies I own a slice of – United Parcel Service Inc. (UPS); Union Pacific Corp. (UNP); Gilead Sciences Inc. (GILD); Archer Daniels Midland Co. (ADM) – announced increases in their respective dividends last week.
My ability to pay my bills via dividend income only improved last week.
To somehow make a mental leap from there to worrying about stock prices would be beyond silly.
And this is one of the biggest reasons one should be a dividend growth investor.
There are far more enjoyable things in life to do than watch the stock market – and financial independence unlocks plenty of time to enjoy those things.
If you’re able to combine financial independence with dividend growth investing, you have a recipe for a stress-free lifestyle that aligns your true passions with how you spend your time. You’re putting yourself in an advantageous position where you access one of the major benefits of investing (being free to live your life how you choose because you’re living off of investment income) without one of its biggest drawbacks (worrying about stock prices and volatility).
To unnecessarily place the burden of worry upon oneself, undoing one of the biggest advantages of being a dividend growth investor in the first place, would be extremely unwise.
Conclusion
Now, I want to make something very clear.
The points listed above do not mean I’m an unaware or uninterested investor.
That couldn’t be further from the truth.
I enthusiastically read multiple press releases/updates every single day (which is how I’m aware of those aforementioned dividend increases) from the companies I own a slice of.
Something going on with the 30,000-square-foot Starbucks Reserve Roastery in Shanghai for Starbucks Corp (SBUX)? I’m interested in that. I’m all over it.
McDonald’s Corp. (MCD) switching to fresh beef? Awesome. Let’s hear about it. Tell me more.
PepsiCo Inc. (PEP) is rolling out a new zero-calorie sparkling water product? Fantastic. I’m checking out the highlights.
But what stock prices for any of these companies – or any other companies, for that matter – are doing? I don’t think I could be less interested.
I think and behave like an owner. An owner doesn’t (or shouldn’t, at least) think or care about stock prices.
You want to be an owner? Want to be a boss? Want to be financially independent at a young age?
Then you shouldn’t worry about what stock prices are doing at all, other than to see short-term volatility as a long-term opportunity if/when the time comes to deploy your regular capital into high-quality dividend growth stocks as you march ever-closer to financial independence and making your dreams come true.
I never timed the market. Time in the market is a far better ally to the long-term investor than timing the market. I spent years of my life regularly deploying my excess capital into high-quality dividend growth stocks at good valuations, which is how I’ve arrived to this position in life.
That said, short-term volatility is a good friend to those regularly deploying capital, as cheaper prices/valuations should be welcomed by any long-term investor. But if you do insist on timing the market in any capacity, Warren Buffett said it best:
And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful.
Otherwise, Buffett put it even better when asked about what he thought of the idea of people watching stock market fluctuations:
I would tell them don’t watch the market closely. If they’re trying to buy and sell stocks, and worry when they go down a little bit … and think maybe they should sell them when the go up, they’re not going to have very good results. The money is made in investments by investing and by owning good companies for long periods of time. That’s what people should do with stocks. All they are are little pieces of businesses, and the businesses are generally pretty darn good.
Couldn’t have said it better myself.
Full disclosure: I’m long all aforementioned stocks.
Did you find yourself worrying about or paying attention to recent stock market volatility? Why or why not?
Thanks for reading.
Image courtesy of: lekkyjustdoit at FreeDigitalPhotos.net.
P.S. If you’re interested in becoming financially independent, at which point stock market volatility should become a non-existent concern, please check out the list of invaluable resources I’ve compiled that personally helped me become financially independent in my early 30s!
Hi Jason, thats the beuty of matured dividend investor as you who dont give a damm about the volatility 🙂 For begginers like me its a good opurtunity to buy some cheaper stocks. Bought some PG shares for 82$ too bad it went bellow 80$ later, but i dont have a magic ball to knoe the exact lowest dip. I managet to shoot T at its lowest dip in 33$ but you can’t win them all i guess 😀
P2035,
Indeed. I’m very happy to be in this spot. 🙂
However, I’ve always been this way. I never really watched or cared about the stock market, other than to look at numbers to write articles and discuss investing. Otherwise, I’d just have a list of ideas in mind for when my next paycheck rolled around – and I’d obviously hope for lower prices when it came time to deploy that capital (which was usually pretty immediately after receiving/saving it).
But short-term volatility is almost always a long-term opportunity, even if you’re not buying stocks. The biggest buyers are usually the companies themselves.
Thanks for dropping by!
Best regards.
Well yes share repurchase is a thing. Personally im a bit reserver regarding share purchases as many companies managet to decrease their equity to unreasonable level (for ex. MCD negative equity) by borrowing and increasing debts. I would like to see companies earning enough profit that goes to dividends, share repurchase and comapnies expansion. Now it is quote rare to see comapanies with growing equity with some exeptions in cash rich tech companies.
P2035,
Yeah, this is a totally different topic for a totally different day. Repurchasing doesn’t exist in a vacuum. Sometimes it’s the best use of cash. Sometimes it’s not. For many large, mature companies, (growing) dividends and repurchases more or less complement one another.
Cheers!
Tottaly agree. I think this would be a topick for my financial analysis part 🙂 as for markey correction lets all in dividend investing community have that little proud smile to day traders who probably got some more grey hair at these days 🙂
My February dividend income is on track to be higher than it was a year ago. Everything you said rings true. It must be nice to take a break from the repetitive, crusading, and biased, rhetoric from the US media.
Fred,
It’s really nice. I hadn’t had an opportunity to mention it until now, but it’s surprisingly one of my favorite things about being over here. It’s an unexpected (but welcome) surprise!
The dividend income just keeps marching higher. The life of a dividend growth investor. 🙂
Best wishes.
Jason, Couldn’t agree more. It is the beauty of the DGI strategy. Tom
Tom,
Definitely!
Cheers.
That was such a great missive Jason! On top of that, I have to say that a compounding, and exhausting component of what is reported in the news, are the conversations that people are having based on said head talking. It is incredible to me the level of fear that people are carrying. I have several friends with a lot of money who are balking at investing $5,000 in a great company like Apple, even when it was in its low $150’s. Now that it is at ~$161, they are kicking themselves for ‘missing out’. I am like ‘are you kidding me’? Buy that sucker before it is $200, and collect those dividends!. Nope, they won’t do it. I send them articles, links to your posts / DTA, etc etc. Like talking to a stone, and makes me dream of a day when I am removed from all of this, which every day forward is a day closer to the promised land of expat / (growing) dividend based freedom. You have definitely emancipated this slave from the chains of financial oppression. You pulled the plug out of the back of my head and showed me what the matrix really looks like. So with that, Morpheus, this ONE again, thanks you.
Andrew,
Thanks so much!
It’s a shame that people eat the fear/mania up. And then they spread it. In my view, it’s unfortunately part of the human condition. But I do what I can to illuminate a really wonderful and different path forward for the few who are interested in it.
Appreciate all the support. Knowing I’ve helped and inspired makes it all worth it for me. 🙂
Best wishes.
Time in the market is better than timing the market. I completely agree with you 100%. We stay the course no matter what with our weekly contributions to our index funds. It has worked out well for us over the long term and it’s very fun to see the power of compounding beat out our yearly contributions. Once you start hitting that big number math takes over.
I hit the gym every morning and while on the treadmill I turn on CNBC. The mania and hysteria is ridiculous. I am glad I see past it and don’t react. All that stuff is for ratings. Stay the course through thick and thin and you’ll be rewarded. Math takes over once you hit the big numbers.
Andy,
That’s funny. I used to do the same. I honestly can’t say why I did it, but I’d turn on CNBC while I’d do my cardio at the gym (when I still lived in the States). I guess it was for comedy? I have no idea. It was 15-30 minutes of bewilderment for me.
Stay the course, indeed. The math is on our side. 🙂
Cheers!
>>The news cycle/focus here in Asia is totally different from the USA. And I find it a wonderful respite.<<
I totally agree! If you think about how much commercial noise there is in America's media, one finds oneself amazed at the sanity when out of the country.
December is the worst, with all the Christmas music and all the guilt and propaganda to spend money. One year I spent the month of December in Asia where they don't do the Christmas mania, and when I arrived back in the U.S. after the holiday, I felt sane!
About market volatility: I have a post on who causes market volatility. (It will be published on Friday Feb 16, 2018).
Smile,
It’s a totally different dynamic over here. The US business media is like a screaming four-year-old child. The business media over here is more akin to a reasonable-but-still-prone-to-mood-swings teenager.
I’ve written quite a few articles in the past about “ignoring the noise”. But you don’t have to really do that over here. There’s very little noise to ignore. It’s awesome! 🙂
Thanks for dropping by.
Best regards.
Hi Jason,
Nice article, As they say the stock market is the only store where is people run out of when things on sale. which reflect to the herd human mentality, the good news this provide the best opportunity to the contrarian who ignore the crowd and buy whenever the others sell at bargain price.
atm,
It’s the best store in the world, yet people tend to look at it and use it in such a disadvantageous manner. It’s always baffled me.
But short-term volatility is almost always a long-term opportunity for those with the capital and appropriate mindset. 🙂
Cheers!
Jason, well said!
I get very excited when I see market storm like last week as I am still accumulating phase to chase my financial independent.
I was able to deploy some capital and accumulate more PASSIVE INCOME for lower cost. Two weeks ago some stocks were trading above $50, but I bought them at $40 a week late. Amazing deals! Investors were greedy and love those stocks at $50, but all sudden they started to hate the stock at $40, even though the company was keep generating growing cash-flow and pumping same/more dividends.
I love to see you like Enbridge (ENB). It is one of my long-term holding, and has already returned me lots of cash in the form of dividend. I hope it will keep pouring more money to our accounts as long as people use oil, gas and electricity.
By the way, juicy dividend hike from Pepsi 🙂
Best Regards,
FJ,
More forward-looking passive dollars for the same active dollar today. To somehow be sad about that defies logic.
Enbridge looks great today. I may buy a few more shares over the very near future.
And I very much enjoyed that dividend increase from Pepsi. Market goes up and down, but my dividend income only goes up. 🙂
Best wishes.
Hi Jason, your are exactly correct on your statements. I regularly try to buy stocks fairly priced every two weeks, and of course when this type of market correction occur I really get exited. I dont even pay much attention to capital gains, is an opportunity to buy a lower valuations. Is great to be a dividend investor. and yes, my dividends went UP this past two weeks when the blood bath was going on. I slept like a baby. I hope you are enjoying yourself out there. Your friend from West Palm; Omar
Omar,
We both slept like a baby, my friend. 🙂
Enjoying myself very much. I can only hope for the same for you and everyone else out there. Life is way too short to not enjoy the few moments we’re given.
Best regards!
Although I watch net worth to ensure I am moving in the right direction. It is times like this I focus on dividend growth. What I know for a fact….my dividends are higher today than they were two weeks ago. Which at the end of the day that is what matters. Thanks for the reassuring perspective.
Tim,
Glad I could reassure you! 🙂
Thanks for dropping by.
Cheers.
You know you don’t really believe any of this, Jason. Just sell all your stock at a loss, move back to the States, beg your old boss for your job back, and buy a big house.
Follow the American Dream.
Sincerely,
ARB–Angry Retail Banker
ARB,
Well, of course that’s what I really think. I’m just waiting for my stocks to bounce back a little bit before I sell out of everything. I’ve already booked my 20-hour first-class ticket back to the US. They’ll serve me caviar and champagne while I laugh at everyone out there actually doing something as silly as living off of passive income at a young age.
Can’t wait to get back to the American Nightmare… err… Dream! 🙂
Best regards.
I know these comments were somewhat tongue-in-cheek, but come on guys, it’s not like there aren’t people in Thailand with bad spending habits, an onerous boss and the desire to own a big home 😉
I believe in the original meaning of the American Dream, but even the popular media driven version of excess and unrealistic expectations isn’t unique to America.
Inheritance folk aside, nobody starts out life with hundreds of thousands of dollars worth of dividend stocks in their brokerage account and/or the ability to generate a substantial income through freelancing. You have to work hard to achieve this level of financial independence and America’s a great place to find and do that work!
Ken,
Well, we’re going off on a tangent here. Don’t get me wrong, though. The US is a wonderful country, filled with many wonderful people and opportunities. I’m very fortunate to have been born there and given my own set of opportunities. Very thankful for that. But it doesn’t mean I have to be ignorant to better opportunities/locales available at a different stage of life.
There are numerous benefits to living in the US. But it’s also a place that has a lot of drawbacks. Whether the benefits outweigh those drawbacks is really an individual call/situation. If I thought my quality of life would be higher in the States, and if I thought I’d honestly be happier, I’d still be living there. That said, I’m not interested in convincing anyone to move abroad. Doesn’t benefit me at all.
As for your initial point, there are certainly some Thais who think and act like Americans, but you’re comparing the rule to the exception to the rule.
For further perspective on the cultural differences in this respect, that was explored via this article:
https://www.mrfreeat33.com/reverse-culture-shock-in-thailand/
Cheers!
Couldn’t agree more! I was checking your blog every few days, as I knew sooner or later you would write an article on the recent gyrations in the market. Glad I was following as this article is as good as I thought it would be.
I do watch the market alittle more than I would like since I am still accumulating my companies, but I watch these prices fall and get almost giddy as I know I can now buy more good companies and achieve higher yields. Friends that follow my investments believe I am crazy since I am not negatively effected by the market decline, I just can’t convince them that SBUX or MMM or any other good company is gonna still be the same regardless of the market.
Too many people believe the stock market is part of the investment itself. If you own good companies it doesn’t matter if the place you bought them from has hit a rough patch.Selling good stock now because the market is in decline is like throwing out your wardrobe becouse the clothing store you bought it from went bankrupt!
Anyway great article as always Jason. More power to the business owners!
Royce,
Thanks so much. Glad you enjoyed the article! 🙂
Yeah, I don’t think there’s any other setting in life in which people emotionally react to lower/higher prices in the same way they do with stocks. It would completely defy logic in any other “store” filled with any other “merchandise”. But this is why a lot of people never really move from the worker class to the investor class. It’s a real shame, because it’s a way better neighborhood. And so people continue to work for their money, rather than the other way around.
Thanks for sharing!
Best wishes.
Hi Jason,
I live in California, and primarily invested in non-dividend growth stocks. The reason for this, as you might already know, is that California is a highly taxed state. If I have to pay taxes at the State & Federal level, by using this year’s dividends to pay last years taxes, this would put a damper on my portfolio’s growth. I would rather postpone taxes until sometime in the future. Maybe I’ll decide to move to a non-tax state, or to another country, prior to realizing any gains. At that point I’ll sell some(all?) the non-dividends stocks and buy some dividend stocks. What do you think about this plan?
Jake
Jake,
I can’t really give anyone specific tax/investment advice, which is more or less what you’re asking here.
The only thing I can say is, I’ve always looked to make sure every situation I was in was as advantageous to me as possible. That mindset has unsurprisingly involved two steps of geographic arbitrage: first Florida, then Thailand. The tax benefits were considered both times.
If you feel like you’re in the most advantageous position possible in all aspects of your life, you’re doing pretty good. 🙂
Cheers!
No reason to panic with a small correction. If you own quality companies and can hold for the long term you will be in fine shape. Your article is timely, I tried having this conversation with a few people who didn’t get it. It was exhausting.
If my interest and dividend income is X as long as the companies are viable it will be x+ in the future.
I held during the 2008-2009 correction and see no reason to not do so now. Long term buy and hold does work for dividend income investors.
Dave
Dave,
We’re on the same page, my friend. 🙂
I don’t bother having these conversations with people. I’ve never been interested in trying to “convince” anyone of anything. I’ve only aimed to provide inspiration to those actively seeking it. But after quite a few emails, I figured it was time to answer them en masse via an article.
Thanks for adding that!
Best wishes.
Great article Jason. In this context whereby you are living off of dividend income, would it be fair to say then that your portfolio necessarily consists of 100% (dividend-paying) equities, with no fixed income portion whatsoever? It would seem to make the most sense to me if that was indeed the case, since you are counting on living off the dividend income. Thanks…
Kenny,
You are correct. I neither want nor own any fixed-income securities.
Cheers!
Thanks Jason. As a follow up, you know how the so-called experts always seem to call for having some (increasing) portion of fixed income as you age. Therefore, is the fact that you have no fixed income portion a function of your current younger age, or is/would your answer still be the same regardless if you were say 20 years older? How about 30 years older? (My apologies for fast-forwarding your life Jason!!!) 🙂
Kenny,
As always, you should invest in a way that makes the most sense for you and your goals. So if you want/need fixed income, you should go for it.
I’ve already clarified my thoughts on this question before:
https://www.dividendmantra.com/2014/07/a-0-allocation-to-fixed-income/
https://www.dividendmantra.com/2015/03/warren-buffett-on-volatility-and-risk/
Cheers!