Dear DTA,
I’m not sure how to trade around the coronavirus news. The market is going crazy. Any advice? I’m wondering when the bottom will come.
-Tanner A.
Hi, Tanner.
It’s great to hear from you. Thank you very much for writing in.
However, even the most experienced traders and investors cannot tell you with any kind of certainty what the market is going to do tomorrow.
Even if the “bottom” hit, you wouldn’t know it until time had passed and proven that out.
That’s why it’s always best to set yourself up with a system that you can rely on in all market conditions.
Now, it sounds like you’re a trader.
Traders have all kinds of systems they can use.
However, I’m an investor.
And I can tell you that I rely on the same system no matter what market conditions are present.
That system is dividend growth investing.
It’s a long-term investment strategy that advocates buying and holding shares in world-class enterprises that are paying reliable and rising cash dividends.
Those reliable and rising cash dividends are, of course, supported by reliable and rising profits.
And the growing profits come about because these are wonderful businesses selling the products and/or services that the world demands.
More products and/or services are being sold to more people, at higher prices.
Fellow contributor Dave Van Knapp deftly teaches exactly what this strategy is all about, via his Dividend Growth Investing Lessons.
You can find more than 800 US-listed examples of these stocks on the Dividend Champions, Contenders, and Challengers list.
I used this system to retire in my early 30s.
I lay out exactly how I did that in my Early Retirement Blueprint.
My real-money stock portfolio, which I call my FIRE Fund, now generates the five-figure passive dividend income I live off of.
Best of all, market volatility doesn’t bother me too much. My dividend income, which is what pays the bills, grows like clockwork.
I built the Fund systematically.
I never tried to time the market.
Time in the market matters trumps timing the market for the long-term investor.
I’ve never been able to tell when a near-term “top” or “bottom” has been in.
Nor did I care.
Nor does it matter.
Pick any “bottom” you want over the last 40 years, and you’ll still find that the market relentlessly marches upward over the long run.
It’s the nature of compounding.
The US stock market has compounded at approximately 10% annually over the last century.
That means the market doubles roughly every seven years.
I mean, at one point, the S&P 500’s “bottom” was 500 points. Then it was 1,000 points.
So on and so forth.
My advice is to not worry about calling near-term “bottoms” or “tops”, because it’s nigh impossible anyway.
Instead, worry about adhering to your system in a very consistent manner and concentrate on the long term.
Whether you’re a trader or investor, we all have similar long-term objectives as it relates to financial success.
We all want to have more wealth, passive income, and freedom.
Toward that end, make sure to check out my Undervalued Dividend Growth Stock of the Week series.
This is a weekly series, published every Sunday, that highlights a compelling long-term dividend growth investment opportunity.
These stocks are chosen for both fundamental quality and valuation.
They’re the “best of the best” long-term opportunities in the market, and each piece includes valuations from professional equity analysts.
Regardless of the system you use, Tanner, look at this volatility as a gift.
And make sure to take advantage today.
I wish you luck and success.
Jason Fieber
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Disclaimer: Jason Fieber is not a licensed financial advisor, tax professional, or stock broker. Please consult with a licensed investment professional before investing any of your money. If your money is not FDIC insured, it may decline in value. To protect the privacy of our readers, any names published in this article are under aliases. In addition, text may be edited, omitted or paraphrased for grammar or length.