Buying Dividend Stocks After A Market Crash

by Mr. Cheap


I made some recent purchases during the volatility in the stock markets. Being quite new to stock investing, I feel like a bit of a “green recruit” being tested in the first skirmishes of a war. I think in “A Random Walk Down Wall Street” they talk about investing on paper (not actually buying the stocks, just tracking an imaginary portfolio) is like a virgin reading about sex. The real experience is different.

Losing money isn’t fun. At the end of the dot-com bubble, I lost about 75% of what I’d invested ($15K of a $20K investment). As bizarre as it may seem (you might not believe this if you’ve been reading my blog for a while), I’m actually not all that motivated by money and I pretty well just shrugged my shoulders and carried on with my life. a couple of years ago I finally sold my position (it hadn’t done anything since) and just recently got around to re-thinking about the stock market and getting into it again.

I *really* wish I could have put that $20K into Canadian dividends 7 years ago, but such is life.

Most people don’t seem to react this way. Losing 75% of their money would make them freak out in a major way (like jumping out of a window). I’ve always followed the advice “don’t invest what you can’t afford to lose”, which is maybe what lets me be a bit more detached.

Losing 5-10% recently was nothing. More then anything I worried about missing the bottom, which as I mentioned yesterday I may have done with NA. I guess this makes me more greedy then fearful :-). If the market dropped enough to trigger a margin call, as I mentioned yesterday (say 20%), I *HOPE* that I’d respond by paying the call and transferring in more cash and buying more.

Buying on margin was scarier than I expected. My $28K margin debt is the second largest debt I’ve ever had (my $95K mortgage is the largest). With both of these debts, the things they were used to buy (the condo and the stocks) are still there and still worth money. Its *NOT* the same as $28K credit card debt. I’m not losing sleep over either debt (which I tend to be a worrier, so I think that means I’m very comfortable with them).

With both the BMO and the NA, I’m comfortable with the businesses. Every time the prices drops 5% from the lowest price I bought at, it seems to me that they’re worth buying more of (if it was worth X, its should definitely be worth 95%of X). I’m confident these are secure, strong companies that will be around for the long term (or at worst, would be acquired for a healthy portion of what I’ve paid). I felt the same way when I signed on the dotted line to purchase my condo, and that’s worked out well so far.

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{ 3 comments… read them below or add one }

1 BeatingTheIndex

I guess a lot of people regretted not being more aggressive during last year’s bargain prices. There’s always next time and with all the double dip talk it could be sooner than you think ;)

2 youngandthrifty

Hindsight is always 20/20 right? I wish I bought more dividend stocks in last years crash- everything was on sale, but alas, it was hard to think like that. =)

I’ve been a bit better now, though. When I see my dividend stocks dip a bit, I try and buy some more if I have some extra cash floating around.

Great post!

3 Rob

I bet a lot of the people that regret not being more aggressive during last year’s bargain prices, don’t regret bashing PM Harper for saying that he thought it might be a great buying opportunity and was bashed for being insensitive to those that had lost money on the market.

Glad I am not a politician.

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