Tuesday, September 13, 2016


I mentioned in a recent post that I already had a strategy in place to deal with a stock market correction, since I've been thinking some type of correction was imminent.  

My old strategy was to stop purchasing any shares until the market leveled off, then purchase as many shares as I could while it was down and on the way up.  I never sold shares unless they stopped paying dividends, not even in the crash of 2008.  I also continued to reinvest all dividends on the way down and on the way up.  This worked out well for me before, even in 2008.  As the market recovered, I ended up with more money in my investment portfolio than I'd ever had before.

However, this time around I decided to play things a little differently.  I'll still hold all current shares, but I will be looking for new stocks to buy and purchasing additional shares of current holdings even as the market drops.  To help offset the loss in value of investments, I have stopped reinvesting all dividends and will collect all payments in FDIC insured interest bearing accounts until price per share of my current holdings drop below my average price per share.  As soon as the share price is below the average price I paid per share, I'll start reinvesting the dividends to add more shares and reduce my average prices.  I figure as long as the price is lower than the original price I paid for the stock, I'll be lowering my cost per share by reinvesting the dividends on the way down and on the way back up.  I've already initiated this plan, in view of last Friday's big drop in the stock market and the further slide yesterday and today.  I'll let you know how it works out.

Some good news to report.  Since the money I transferred from my taxable account to my Roth IRA wasn't available to invest until today, I picked up shares of CRF, TROW and CHI at much lower prices than I expected, so the dividend yield and increase to monthly cash flow are much better than I expected.  Then too, the stocks I sold in my taxable account to fund this purchase have since dropped dramatically, so just by chance, the timing was in my favor.  If the trades are settled by the 15th, I should see dividend income from these purchases by the end of this month.  

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