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... How Do I Beat the Buyer Blues?

Any guesses on the most asked question in investing!?! Anyone? Bueller?

After the question “what should I buy?”, the next question people ask without fail is “when should I buy?”.

Of course, we all know the best answer is: buy when the market is low.

I mean, right? D-oh! That’s a no-brainer.

But wait, how do you know when the market is low? It’s simple…you head on down to Madam X and let her read your tarot cards. It’s the smartest way to know when to buy low and we can say with great confidence after years of research, trial and error, and many attempts to time the market. It beats the hell out of flipping a quarter, checking the alignment of the stars, or reading the financial news (yawwwwn).

(Fine print: we aren’t saying no good information can come from coins, stars, or analysts – in fact, once in awhile, everyone is right.).

Sheee-it, son! If you know absolutely nothing about the stock market, at least know this one steadfast truth: no one can time the market. (unless you are indulging in a little criminal action – à la insider trading – but let’s say you are generally a law-abiding citizen who loves your mama, pays your taxes and only speeds a little).

Ok, so we are going to rule out all the crazy ass ways people try to get the upper hand in the market and go back to DIY Dividender basics.

Let me ask you: what’s the most important thing in a DIY Dividender portfolio?

Is it when you purchased the stock? Is it the gap between what you paid for a stock (book value) and what it is currently trading for (market value)? Is it the variety and volume of stocks you own?

Nope. Nope. Nope.

Remember, as DIY Dividenders, we are not day traders or speculators. We are not trying to get out of the stocks we purchase.

Can you imagine if people married in the same way Modern Portfolio Theory says we should manage our investments – marry soon, marry often, marry poor, divorce rich. And we haven’t even broached the topic of marital diversification.

Hmmmm, on second thought, maybe there’s something worth exploring here….shhhh, don’t tell my husband!

The most important thing in a DIY Dividender portfolio is….yield, pure and simple. This bears repeating (especially since I’ve distracted you now with dreams of divorcing rich): we are building a solid income producing portfolio and how we identify that income is through yield.

So don’t try to time the market. Instead, think about your yield target. Think about your dividend income in 5, 10, 20 years. In dividend growth investing, you worry less about when the price is right (sorry Bob Barker!) and focus more on when the yield is right.

As with all things DIY Dividending, knowing when to buy should be easy as 1, 2, 3 and simple as A, B, C. So…when should you buy?

Step 1:

Choose a target yield – generally between 3-5% (as Aunt Edna says: don’t be a green-eyed, greedy guts!).
Decide how much to spend and how much to keep. It is always a good idea to keep some cash held back**.
Identify Canadian companies that pay dividends and grow those dividends for at least 5 years.

Step 2:

Watch those stocks.
- You can be super efficient (aka lazy like me) and set up a market watch list in your brokerage account.

Step 3:

When the yield on those stocks comes into your range, you know it’s time to pull the trigger.
- Caveat #1: This can take time…so be patient, young grasshopper.
- Caveat #2: If you are so over being patient, you may need to adjust your yield target. Remember, because your dividends are growing, you won’t be stuck at a lower yield for long.

And there you have it. A simple way to beat the Buyer Blues, get invested, and start making moola.

** Cash in reserve – there’s a reason humans say: save for a rainy day. If you don’t have your money in the market, it is not making money for you. But in a very hot market (perhaps like the one right now in 2021), you don’t want all your money in. It’s a good idea to keep some back because the Bear is Coming. When the market takes a dive, you can use that cash to go shopping for deals and BYOY (Boost Your Overall Yield)!

Want to become a DIY Dividender and learn how to build a reliable and growing income?

Check out our workshop, DIY: Design Your Six Figure Retirement.