CHASING CAPITAL GAINS CAN LEAVE YOU EMPTY HANDED

I mentioned in my last post how much more I prefer to pursue dividends as opposed to capital gains.  Like I said before, I enjoy capital gains as much as anybody, but I also know how easily they can quickly disappear.  The drop in the stock market this week provides ample proof of what I was saying. The drop in share prices over the past two days has dramatically impacted the overall value of my portfolio.  However, even if the market shows a loss for the month, my dividend income will increase!  Had I only been invested for growth, i.e. capital gains, I would have been sorely disappointed.  Since my investment objective is increasing dividend income every month, I'm actually quite excited.  With the stock prices being down, my big dividend days at the end of the month and the first of next month, will buy more shares than they would have had prices remained the same or went up.  So I'll make a bigger gain in monthly dividend income than I had expected.  I'm pretty happy about that.

I've bought and sold a lot of stocks over the past 25 years.  Some I made a lot of profit on, some I lost money on, that's the way it works.  I still buy some stocks with the intention of trading for capital gains, but I only buy stocks paying dividends, so if the price should go down instead of up, I'll still collect some cash on a regular basis.  

As a reminder of how fleeting capital gains can be, I own 1,000 shares of stock in my taxable account that I bought on a tip from my sister's boss.  It seemed very promising at the time.  Didn't pay a dividend, but it looked as though they were really going places.  I'm not sure exactly where they went, but it wasn't where I expected.  My 1,000 shares is currently worth 10 cents.  Which is exactly why I say chasing capital gains can leave you empty handed.