Lions and Tigers and Bears, Oh My!

Bear versus Bull

You can’t have failed to notice the recent turmoil in the stock markets. Even if you’ve come to this blog looking for money-saving tips, or how to cut your grocery bill, you will have more than likely seen or heard about the plunge in the global markets over the last few days.

One of the problems with this is of course, the media like to generate crazy headlines, that usually strike fear into millions of normal people around the world. I’ll give you an example – ‘Market Crash Wipes Millions off Pensions’ – now all that is going to do is to upset retired people isn’t it?

I wonder what would happen with a little change of perspective here… I like to think about these market corrections as SALES. Your favourite stocks just got cheaper! This is no bear market as of yet (that would need a 20% fall), but rather a technical correction (10% down). So basically, we’re getting 10% off stocks right now. When would you buy steaks at the supermarket? When they’re on sale of course!

The key principle is not to panic. If you are interested in buying high-quality dividend-paying and dividend-growing stocks, then this current correction should be seen as a potential buying opportunity. Now, of course, we don’t know what tomorrow will bring, but history has taught us that it is better to hold on, rather than to sell out of fear. I am no financial adviser (do not take this article as advice!), nor am I a psychic, but I do know that stock markets go up and down over the years, but in the long-term stocks are one of the best ways to make real (i.e. above inflation) returns on your money.

If I were you, I’d be encouraged by reading sound, long-term investors such as John Kingham and JL Collins – both of who agree with little old me… Not that I am saying I am wise and seasoned like they are, but there is another fellow whom I have great respect for and so I may also be likened to a Zombie on this matter of up/down buy/sell panic – none of us has a crystal ball, we are just offering opinions.

For me personally, I only wish I had more spare capital to take advantage of cheap prices right now. I recently topped up on my RDSB amidst this volatility, but I’ve got a long list of high-quality companies I’d also love to top up on, if some spare money should arrive in my grubby little paws. Companies such as Interserve are just begging to be bought by me right now. I also wouldn’t mind getting my hands on ARM Holdings – although not a dividend growth stock, but growth on its own (almost). ARM are going to expand their Cambridge base, and with their stock dipping below £8.30 on 24th August, I would’ve loved to have swiped some at that price.

However, all is not lost, maybe. I feel like we will see more volatility over the next couple of weeks, so maybe I will just get my change to pick up some high-quality stocks on sale in my coming monthly purchases. Boring stocks like National Grid will be close to the top of my list, as well as Unilever, PZ Cussons, and Diageo. Incidentally, the latter two I still haven’t bought into yet, as they hadn’t hit my targets. PZ Cussons’ PE was over 20 (and I am cheap, >20 just won’t do) and I was waiting for Diageo to come down to a more reasonable £16ish mark. It had been fluctuating between around £17/18 and £20, and I thought no, just hang on. As I write, it’s around £16.40 – it’s 52-week low.

I hope you are not living in fear…

Cheers!

Image Credit: streetwisejournal.com

10 Comments

    1. well, I’ve not lost anything. Yes, the share price is down, but I’m not usually looking to sell my shares, but rather hold for a long time and collect the dividends along the way.

  1. M,

    Down, down, up, down, up, up, down, down, down, up, … I find the entire experience very amazing, even though I’ve lost quite a bit of money too – virtually at least. I just can’t comprehend how people would pay 3% less or more on a day-to-day basis for exactly the same business.

    I hope the prices remain low for the foreseeable months since I’d love to buy more at current price levels.

    Cheers,
    NMW
    No More Waffles recently posted…Dividend Income for August 2015My Profile

    1. Hi John,

      thanks for stopping by. You are so right – the media love to report the negative side… but rarely the positive. However, it is a lot less common to get sudden rises in the markets compared to the amount of sudden falls.

      Cheers

  2. The media is looking for any news so this ‘global crisis in China’ is just a good example of the hype and scare mongering that can cause panic.
    Yes, pensions are affected – again – for those not at retirement age yet, it makes you think twice about investing in pensions if the funds can drop so dramatically.
    As you say, people need to look at the long-term and not panic but this is part of the consumer/debt culture. The more you are indebted then the more you panic about savings/investment erosion.
    I too am looking to buy into some stock at a discount, Unilever for one, just biding my time.

    1. Agree with everything you said. People who are nearing retirement age should arguably have been adjusting their portfolios towards ‘safer’ things anyway, but I totally agree that the more indebted and consumeristic people are, the more they will panic. Personally, I’m hoping for lots of volatility next month and hourly will be able to pick something solid up really cheaply.

      Historically, September is one of the worst months on the markets, so fingers crossed this China nonsense will add to the bargains!

      Cheers

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