Investing in stocks can multiply your wealth over time. Investing in a stock that returns 9% a year will double your wealth in approximately 8 years.
Most investors understand the compounding nature of the stock market. Most investors also understand that the stock market is volatile. Returns don't come in evenly. A stock that averages 9% a year may go down 20% one year, then come up 36% the next year.
The worst investing mistake you can make is to sell just because a stock's price has declined. No one invests in stocks that only go up. That's not the purpose of Sure Dividend, and it shouldn't be your goal - you will never achieve it.
Earlier this month, value investor Mohnish Pabrai took part in a Q&A session with William & Mary College students. Q3 2021 hedge fund letters, conferences and more Throughout the discussion, the hedge fund manager covered a range of topics, talking about his thoughts on valuation models, the key lessons every investor should know, and how Read More
Stock prices tend to decline for a reason. Maybe a company missed its guidance, maybe there's regulatory uncertainty, maybe commodity prices are hurting earnings.
Strong businesses can withstand the normal turbulence that the free market creates. Sometimes earnings decline, sometimes they beat expectations. If you can't hold during the declines - during the negative volatility, you won't reap the benefits of the gains - the positive volatility.
There is a time to sell. When a business can no longer generate long-term (measured over several years) growth due to a fundamental change, it can be time to sell. This is often accompanied by a dividend cut.
Unfortunately, most investors sell far too often, and significantly reduce returns. The single greatest area of improvement individual investors can make (in aggregate) is to avoid selling due to temporary price declines.
Looking for more info on when to sell dividend stocks? See this article.