Wow, the stock market sure has been volatile lately. The retail sector is taking a big hit, just take a look at Target, Walmart, Amazon, and Costco. Ouch! Should you hoard cash and wait till the bear market is over before investing in the stock market?
No, I don’t think so.
If you’ve been reading this blog long enough, you know I believe in time in the market, rather than timing the market. I think it is very important to invest money in the stock market regularly and take advantage of dollar-cost averaging. More importantly, remember to separate your emotion from investing!
It is also important to step back and look at the big picture. Even with the recent drops, both TSX and S&P500 are still well above the 2020 highs.
In late 2021 and early 2022, some investors were complaining that stocks were too expensive and that they wished they had gotten into the market earlier. However, the same investors are now worried about the bear market and are hoarding cash rather than investing.
Oh, the irony!
Back in 2020, we added a lot of new cash to buy dividend paying stocks because we believed things were on sale. We added new cash to our dividend portfolio every single month except for December. Although we didn’t time the market perfectly at the bottom (I didn’t expect us to), we purchased a lot of stocks at depressed prices:
- 378 shares of AQN.TO at $19.16 per share
- 100 shares of BEP at $45.85 per share
- 57 shares of BMO.TO at $77.63 per share
- 102 shares of BNS.TO at $53.26 per share
- 393 shares of BPY at $16.59 per share
- 116 shares of CM.TO at $75.62 per share
- 12 shares of CNR.TO at $118.29 per share
- 43 shares of CU.TO at $32.40 per share
- 374 shares of ENB.TO at $38.72 per share
- 450 shares of ERE.UN at $4.69 per share
- 27 shares of GRT.UN at $67.11 per share
- 453 shares of IPL.TO at $22.53 per share
- 50 shares of NA.TO at $65.54 per share
- 20 shares of PEP at $135.94 per share
- 26 shares of RY.TO at $84.60 per share
- 121 shares of SRU.TO at $31.83 per share
- 118 shares pf SU.TO at $30.63 per share
- 320 shares of TD.TO at $63.11 per share
- 16 shares of VCN at $32.13 per share
- 612 shares of XAW at $28.25 per share
In case you’re curious, around $115k was deployed with $87k of that was new cash.
As you can see, we did well for most of our purchases (we did poorly on some purchases), because stock prices were so heavily discounted. Back then, people were extremely fearful as if the sky was falling!
Looking back, it was mind-boggling that we purchased TD shares at an average price of $63.11 (it’s over $90 currently) and CM shares at an average price of $75.62( it’s over $130 currently). I wish we could have deployed more cash then.
If you’re still in the accumulation phase like us, you should be wishing and dreaming of a bear market!
So remember, Keep investing regularly and diversify through time in the market.
Good Reads From The PF Community
Here are some good reads from the personal finance community that I’ve come across in the past few weeks.
Dave at Accidental FIRE states that Financial Independence is the summit, but the climb is more important. I can’t agree more – “I love climbing mountains. Notice I wrote “climbing”. Do I love summiting mountains? Yes, of course, that’s the goal in the end. But I also love the process, the climb. After all, 99.9% of the process is the climb, and if I hated that part I would never do it again just to have a chance to get 30 minutes on the summit in what is often cold and windy conditions. To be clear I do usually let out a scream at the top and the feeling of achievement when reaching a big summit is amazing. But without the process of the climb – the things I learn during that process and the hardships I overcome – it would be fruitless. That would be like being dropped off at the top by helicopter, where’s the accomplishment in that?”
John from ESI Money interviewed a couple in their early 30s that are millionaires -“I’ve been chatting online with millionaires all day. I have enjoyed sharing perspectives with other millionaires/those on their way in the MMM forum. I’m focusing on a diversified approach and decreasing risk in our portfolio. The biggest task we’re working through is how to design a life that we love and don’t need a vacation from.”
I really enjoyed watching Bill Burnett’s TED talk on the 5 steps to designing the life you want.
Chris from Can I Retire Yet wants us to understand the time value of money – “The concept of the time value of money is that a dollar received today is different from the value of a dollar received tomorrow. Typically, a dollar received today is assumed to be more valuable than a dollar received in the future. This is because you can invest your dollar today putting it to work creating more future dollars. Conversely, your dollar today could be less valuable in the future if it is not invested at a rate greater than inflation.“
Liquid from Freedom 35 Blog has been upping his Youtube game. I quite enjoyed his recent Live Q&A session.
I really liked reading how Jeremy from Go Curry Cracker travel hacked their way for a Hawaiian Spring Break and saved over $3,000 for his family. We met GCC Jr when he was a baby and it’s amazing to see how big he is now – “We went to Hawaii for spring break. Travel hacking saved us at least $3,000 and got us upgraded to a $3,000/night suite. Not bad.” His travel hacking experience totally reminded when we travel hacked our way to Maui and saved over $10,000.
Dividend Growth Investor looked at the best time to buy US stocks – “Companies tend to initiate share buybacks when share prices are high, and they are flush with cash. Then they end up cancelling them, or not going through with the share buybacks, when share prices are low. This is the opposite of how you should be buying shares in my opinion. On the other hand, companies tend to maintain or even increase dividends, even during a downturn.“
Finally, I found this video on Tesla’s latest FSD version fascinating. It shows how much further ahead Tesla’s self-driving technology is compared to its competitors. Does this give Tesla unfair advantages over its competitors and convince one to invest in Tesla?
What’s coming on the blog
I have some interesting articles lined up in the upcoming weeks including things I’ve learned along the FIRE journey, best Canadian renewable energy stocks, and comparing hedged vs. unhedged ETFs in Canada.
Have a great weekend everyone.
Thank for laying out your investment philosophy and goal. I am new to your site. Wish I was your age an read your blog from the start. All my kids know your blogs now. For myself, I will be 64 yrs at the end of this year. I need revenu + capital to cover my expenses. With inflation hitting me very hard, I had to re adjust my spending. What would be an example of a ETF portfolio for retired people like me. Just example if you want! Alot of discution on Risk management but very hard to define for me. Thanks for any comments
Thank you for sending my blog to your kids, appreciate it.
For retired folks, an ETF portfolio that has a mix of bonds and stocks probably would work well, take a look at VBAL or XBAL. https://www.tawcan.com/all-in-one-etfs-canada/
I look at the current downtrend in the market as the opportunity that market gods have given me to buy at last year’s prices. Win-win!
Exactly!
I tend to have 10-18% in a cash position at most times . I pushed 18% cash into stock during the May 2020 down turn …. now back to 18%+ in cash and looking for another opportunity to deploy it soon . I will be looking to deploy it within the next 6-8 months or so( basically trimming Oil/Gas position I bought back in May 2020 – BTE, CPG, SHELL, KEY, PPL , Magellan ,etc . I think there will be plenty of weeks , if not months of horrendous down turns that will be great buying opportunities . I am only usually out of the market on 10-18% cash for a period of a maximum of 3-4 quarters. This method has served me well . Be patient , and look for entries in beat-up sectors or the general market . I think we are in for a recession/depression as a result of hyper inflation Brough on by senseless Government spending- hence I will deploy cash once numbers come in for Q3 and guidance on future revenues drop , and CPI index and other bench marks come into focus . You cant spend trillions upon trillions on a far of war, and pet-programs w/o Macro Economic repercussions , and impunity. Simple Macro Economics really. I suspect once Midterm elections are over-with in the USA and the Dem’s being crushed into oblivion – their will be some economic optimism for a short period of time going into 2023 – but this window will be brief . Having some “Dry Powder” for a short period of time is never a bad thing if you deploy it at strategic points in the economy ( like a Bank Of Canada rate increase , and such – plenty of those coming ! ) . The point is to have a economic plan on deployment and just don’t sit it out trying to catch a falling knife ! Its all about Risk:Reward ratios . Happy investing guys … Good health and happiness ! JamesV
Being patient is very important when it comes to investing. 🙂
I agree and do DGI as well but from now on in 2022 and beyond we won’t have US, EU, Canada, Japan, China Central Banks pumping in $Trillions of helicopter money and 0 % interest rates.
Why risk 3-4% dividend return on a stock when pretty soon you can get a risk free 4-5% interest rate at the bank?
I’m sitting on the side lines for the summer until the inflation/interest rate issues are more clear.
GIC’s are looking more and more attractive but I certainly wouldn’t put all our money in GIC’s.
I see stock market volatility as an opportunity. Great stocks to buy at discounted prices. 2020 was also the year I loaded up on more stocks then probably any other year. No complaints here. Great Post! 🙂
Same, it’s nice to accumulate shares at discounted prices.