Selling: The Emotional Response

What is it that makes us human? One could argue anything really. It could be our ability to adapt as mammals to new situations. It could also be our ability to feel emotions beyond that of the initial origin. The point is that being human comes with many advantages but also with some clear disadvantages. Sometimes however, they can be one and the same.

One of these advantageous disadvantages is our ability to feel emotions on a higher level and to learn from them on an IQ level that is above that of other species on the planet. By having this ability we can think, reason, and make judgement calls based on it to predictably influence our future course or direction. When this is applied to stocks our minds can play tricks on us. Did you know that the human brain can experience pain much stronger than it can experience happiness?

The feeling is a gut response by your sympathetic nervous system that makes sure that if something bad happens in your life, you may be smart enough to avoid it next time. This is a serious advantage when it comes to learning lessons in the stock market. If we make a bad pick, we can learn from that pick and how to avoid it next time (to a certain degree). This however is also a double edged sword, as I motioned to earlier in the article. By having this ability, we can also be tricked by our own minds.

Investment Essentials: Status of the Market

We know what the market is and we know that stocks are sold there but how does one actually gauge how the market is doing? And what are points? Aren't we trading dollars? 

These are common questions for new investors. Just like anything else, there is a score kept on Wall Street. One just needs to know where to find it. For Wall Street, the easiest way to find your gauge of how the market is doing is to look towards the Dow Jones Industrial Average - often referred by the acronym DJIA. Or, if you don't like the DJIA, you can look towards the S&P 500 (which is what I like to use instead). The DJIA includes some of the most well known companies in the United States. There are 30 companies in the DJIA all together. It is a collection of these stocks that are brought together to tell investors how the market is doing on any given day as it is supposedly seen as an average. 

Positive Net Worth

The road to positive net worth can be quite the trying one for most people. Most of us in this day and age bring on debt into the adulting world. Whether it be from student loans, a bad car choice, or even a bad run in with a roommate that never paid their share, you find yourself deep in a hole that you never thought you would find yourself in. Thankfully, that hole doesn't have to last forever.

You see, I had dug myself into that hole too. I went to college the smart way. First stop was to community college where I paid each semester in full by working as a bartender, model, and bus boy. I was lucky, tuition at the time was a mere $15/credit hour since the schools in my area were restructuring. This saved me a ton of money because it allowed me to focus on passing and not having to worry about any loans as I adjusted to the differences between college and high school. Once I obtained my associates degree however, I had to move to the much more expensive choice that could no longer be avoided. I had to go to a typical four year, rack up the debt, and get out as fast as possible. Even though I did just that, I still eneded up with a sizable debt. Or... I would have if my parents didn't end up paying for it.

Foolish Day Trader

Once upon a time, all of us were opening up our first investment accounts with dreams of making it big. No amount of money seemed to be insurmountable. This was even more so for the folks who had been lured into investing by stories of millionaire day traders. The idea seemed to be so attractive. Invest a little bit of money, multiply that by the amount it goes up every day or short it while it goes down, pull out your money and bam, you’re a millionaire!

Unfortunately, this was not the case for almost everyone who decided to continue to go down the road of day trading. In fact, studies consistently show that a very small minority (some claim less than 1%) are actually successful over the long term. This is due to a multitude of factors that drive the market every day and even more so due to the way the human brain functions. First off, there are big risks around every corner, especially if you’re in the business of shorting. If the profits are big, you usually bet bigger, and therefore can lose that much more on your next bet. Secondly, even when you do win, taxes and commission charges are always knocking on your door to pay up. Because the day trader is taxed at a higher rate because they trade on short term investments, they constantly get hit much harder than those of us who hold our stocks long.

Collateral Learning

Once in awhile when you're evaluating a stock for purchase, you find something that reminds you that investing is not just about numbers. When you invest, if you do the research that you should be doing, you learn more about the world and various sides of business that without researching you would never have run into without luck. This is because when you start to research a company, you have to really research it. You have to look into the various sides of the business, how they make their money, what affects that income, and if that income will continue. This means you have to understand every side of their business and in that way understand another side of life that you wouldn't normally.

This happened to me just last night when I was digging into ARLP (Alliance Resource Partners L.P.). Their insanely high dividend yield caught my eye and I saw that they were very much on discount. The thing that I liked even more was that their income just kept rising, year after year, without fail. When I normally run into that sort of thing, it means good things for the future. Even though the payout ratio was way over 100% which would normally turn me the other way and running at full speed, it was hard to think about not throwing some money at it because it almost seemed like a sure bet with their income constantly on the rise that they would eventually level that out.

Portfolio Performance

Measuring your portfolio's performance is an important step of being a dividend growth investor. Our portfolios can be affected continuously by surges in the market, economic downturns, upturns, or even buying and selling if not done carefully. This causes the need to consistently take a look at your portfolio to bench mark the progress - a step missed a lot by the DGI community because of the thought that the dividend payments reign supreme and the portfolio as a whole can be ignored. It is important however to always be checking your portfolio to make sure that none of your assets are looking to strip you of more than your dividend payments could ever make up for.

The Importance of Watching

Watching the market can be a giant and a lot of the time stressful task. Investors who have been at the game for many years who have become dulled to the ups and downs of the market can even be tricked by it a few times even though they've seen it so many times before. For an untrained eye however, it becomes all that much more important to watch the fluctuations of the market almost daily.

I was having a chat with one of my buds over our weekly work outs and I found myself giving him a piece of advice that I shouldn't have. Being a new investor, he has been digging his heels in and absorbing as much information as possible from me and other trained sources. This means that he is even more susceptible to listening to all that I have to say since I have been in the market for a little over two years now and I've gotten a pretty

PEG Ratio?

I'm not stupid enough to think that I know everything. Investing is one large process of learning more and more each day if you're doing what you're supposed to be doing. With this being said, I personally have never been one to use a PEG ratio as a unit of measure for the evaluation of a stock. Why you ask? It's because I didn't know what it was, what it was for, and didn't yet know how to use it to my advantage. Being a young investor, I've got lots to learn so I have to take it day by day and subject by subject. As this is the case, let's learn about PEG ratios.

When Discounts Dry Up

Going hand and hand with my last article, I wanted to take a deeper look into what one should be doing when the market isn't showing many deals. In addition to spending that time looking and waiting at new opportunities in the market, one should also bring saving to the forefront of their minds. This ensures that when that deal hits, you'll be prepared for it.

Stock Hunting

The budget has been finalized, the funds are sitting in the account, and I’m ready to start throwing hundreds at the Stock Market Club like I’m going to die tomorrow. The feeling is common to so many investors just like me. When you’ve got money that you’ve moved to your investing account or had deposited from your last hard earned paycheck, you feel like the hunt is on. Where you were once a calm and collected individual with a tight hold on your stocks and your money, you now find yourself salivating at the mouth just waiting for a good discount stock to throw your money at to start making it work for you.

Transaction Cost Meltdown

Imagine that you've just hit pay day and your budget looks great. You've got some funds left over for the month that you can use to invest with. In no time at all, you've uploaded those funds into your investing account and you're already scouring the market for a good deal. The problem however is that even though you may have a large amount of money to invest in stocks, you question whether or not you should buy some of stock A and some of stock B or if you should invest it all into stock A. We've then reached a turning point that will decide what kind of investor we will be. 

Finance for Kids

If you read my last article, you know how important it is to me that we assume our role as leaders to the younger generation. I've already spoken about how we should set our long term goal for our dividend growth portfolios to be legacy portfolios but that seems to be the last step rather than the first couple that need to first be bridged. If a child has no financial background whatsoever, learning to run a portfolio is going to be like reading an alien language. Where do we start then?

Creating a Legacy Portfolio

As a dividend growth investor, my primary focus is on analyzing and selecting solid companies that pay raising dividends over time. By doing so, the hope is to ensure that the portfolio rolls downhill in the same manner as a small snow ball. Over time, the snow ball collects more and more dividend payments (snow) and therefore becomes bigger and bigger. Eventually, the snowball then becomes big enough where the payments made by it are so big that it covers living expenses and allows one to retire on them. I feel like this is the eventual dream of every dividend growth investor. But what happens after the snow ball reaches that point? Yes, your retirement appears very solid but what happens after you kick the bucket?

Mind Over Mr. Market

Mr. Market, the alter ego of the stock market that decides that some days he wants to move in a thoughtful and meaningful way and on other days crash, burn, and send hell raging through your portfolio. Regardless of what Mr. Market decides to do, it appears to control a certain part of many people's psyche in the wrong direction when he decides to go on his rampage. Due to this control, we need to learn to master our own minds so that we end up running the show rather than him controlling the scene.

What really drives our brains when Mr. Market shows up? There are a multitude of factors. The most important is that we're trained from a very young age that if something works, do more of it to make sure it still feels good. If on the other hand, you place your hand on a hot stove and it hurts, you immediately remember not to put your hand on the hot stove. It only takes once to remember to not place your hand on a

Aim for a Catalyst Stock

I believe that one of the most important things to do when looking for stock to invest in is to specifically try to eye the market for a catalyst stock. By this I mean to say that I watch and listen to the news and whenever I hear or read that a company that was once known and loved has suddenly come under fire for some reason or another, that's enough reason to start looking into the company as a potential investment. The human brain wants to lead you to believe otherwise and the media just eats it up. After all, at the core of everyone is a little beast that loves to start or watch drama unfold.

Essentials Tag

As you may have noticed, I've been posting some articles lately that appear to be aimed at a younger investing crowd. These articles are what I like to refer to as the essentials. I plan on continuing to post articles like these in the future to bring younger investors up to speed if up until this point they have been blindly throwing darts at stocks or completely ignoring investing. I post links to my blog on social media to try to pinpoint these young or potential investors to show them that investing is not as barred to them as they had previously thought.

With enough of these essentials, pretty much anyone should feel like they have a great hold on all the items they need in order to start actually understanding companies that they wish to invest in. Granted, as a dividend growth investor, my posts will be mostly aimed at pieces that I feel are important to dividend growth investors but there may be items outside of this realm that I feel also help us analyze companies of interest. 

With this being said, I have since tagged these posts appropriately under the tag "essentials" so that those who are interested can more easily find them. As a message to those who do not find a need for these types of posts, you can simply scroll past them or stay and read them while also noting other items within the subject in the comments that may be useful to young investors. I think this will greatly help those who so desperately need the help.

Stock trading should be something that we all try to understand as best we can and it should also be our job once we become seasoned investors to educate those who have not yet dipped into the trade. If we neglect to do so, we reject those who were likely very much like our past selves prior to obtaining thriving portfolios and the knowledge on how to obtain them. Whether or not you agree that it is our duty to provide this information is your own issue but I myself will be doing everything in my power to try to assist those who have questions and find even the slightest bit of interest in the subject and I hope that I am not alone. 

Thank you,

-Dividend Monster

EPS - Earnings Per Share

Yes, EPS means Earnings Per Share but what does it really mean? EPS is the portion of the profit of a company that is assigned to the share of the company that you are looking into. Basically, it's another good indicator of whether or not the company you're interested in is profitable.

Price to Earnings Ratio - P/E

In my last article, I reviewed the method I use to pick stocks for the Cookie Jar portfolio. One of these items was using the P/E ratio as a factor to determine whether a stock is worthy. Today I want to dive in deeper into P/E ratios: what they are, how to use them, and all in all breaking them down.

My Method of Evaluation

I think the question that I get most from readers is what method of evaluation I use to choose the select stocks that I feel really fit the mold for the Cookie Jar portfolio. After all, it should be the most important question for any dividend growth investor. What really matters to me? What do I hate most and try to avoid?