The Hardest Part About Investing

The Hardest Part About Investing

I have been investing for a lot of years.  I have seen a lot of water pass under the bridge, so to speak.  In my mind, the most difficult obstacle to overcome is yourself.  I may do a ton of analysis on buying a certain stock.  But when it comes to selling it, I often (admittedly) do not perform a ton of analysis.  It is either:

1. I am nervous about something (either stock specific or broader market).
2. I want to buy something else.
3. I hear something on TV or read a negative article.
4. My stock has either gone up a bunch or dropped a bunch.

I suspect we all do these things. Psychology.  We let our emotions make the sell decision.  And often it is the wrong decision.  I panicked and sold TROX for a huge loss in October. Guess what?  It has gone up about 35% since then.

I encourage everyone (and myself) to write down why you buy a stock.  Then have some conviction.  You do not need to read every single Seeking Alpha article. You do not need to worry every time it drops 2%.  Remember that Greenblatt says the "market sometimes just goes nuts".

It is also easy (and I am guilty of this) to try and time the broader market.  I think I am decent at determining a decent entry point on a stock. But I am terrible in predicting when the broader market will drop 10%. Just can't do it.  And I have given up a lot trying to do it.

That is the advantage of snowball investing.  Taking the long view.  In time value plays out.  Buy good stocks at good prices and be patient.  That is the beauty of picking dividend stocks.  When the market drops, do not panic, just tell yourself that your dividends are buying more shares for you.  Just tell yourself that the good company you bought can buy back shares more cheaply.

I think a key to this mindset is using the metric of expected dividends more and total value of portfolio (which is subject to emotional swings by the general public) less.  I mean,  if your dividends in aggregate every year go up; I think we can all agree that is a good thing.  So here are my expected dividends for 2013 (multiplied by my mystery factor).

Stock	Shares	Ann Dividend / Share	Yield	Projected Dividend
AAPL	150	$      10.80	2.1%	1,620
BHK	2,259	$        0.88	5.8%	1,979
CIM	10,000	$        0.36	13.0%	3,600
CSCO	4,292	$        0.56	2.8%	2,404
CSQ	5,482	$        0.84	8.2%	4,605
FCX	1,100	$        1.25	3.5%	1,375
FSC	2,802	$        1.15	10.6%	3,221
HFC	1,217	$        1.40	3.2%	1,704
INTC	1,974	$        0.90	4.2%	1,777
JPM	1,684	$        1.20	2.6%	2,021
JQC	4,193	$        0.80	8.0%	3,355
KMF	1,874	$        1.77	5.8%	3,316
MPC	582	$        1.40	2.2%	815
O	558	$        1.82	4.3%	1,016
OIBAX	3,960	$        0.29	4.4%	1,148
PGR	2,092	$        0.41	1.9%	858
PRE	536	$        2.48	3.0%	1,329
PVD	427	$        7.65	6.9%	3,266
SAI	4,680	$        0.48	4.0%	2,246
SLCA	2,062	$        0.50	2.6%	1,031
STO	1,040	$        0.98	3.9%	1,019
VIVHY	2,296	$        1.30	6.0%	2,985
Total			4.6%	46,689

Then, here are dividend hikes I have tracked over the past year +.  These are like icing on the cake, as they create more than you expected when you bought the security:

Date	Stock	Prior	Current	Change
12/1/11	KMF	1.64	1.67	2%
12/30/11	LNC	0.20	0.32	60%
1/31/12	CSQ	0.63	0.84	33%
2/3/12	PRE	2.40	2.48	3%
2/3/12	AZN	1.85	1.95	5%
2/7/12	STO	0.94	0.98	4%
2/7/12	FCX	1.00	1.25	25%
2/9/12	CSCO	0.24	0.32	33%
2/9/12	SBS	2.39	3.03	27%
3/13/12	USB	0.50	0.78	56%
4/2/12	RTN	1.70	2.00	18%
4/2/12	KMF	1.67	1.70	2%
4/25/12	XOM	1.88	2.28	21%
5/3/12	WBK	0.80	0.82	2%
5/7/12	INTC	0.84	0.90	7%
5/9/12	KSW	0.15	0.20	33%
5/10/12	PVD	4.67	5.13	10%
6/5/12	HFC	0.40	0.60	50%
6/6/12	BHK	0.80	0.88	9%
6/28/12	KMF	1.70	1.72	1%
7/30/12	MPC	1.00	1.40	40%
8/15/12	CSCO	0.32	0.56	75%
9/28/12	KMF	1.72	1.74	1%
10/1/12	MSFT	0.80	0.92	15%
11/2/12	HFC	0.60	0.80	33%
12/18/12	KMF	1.74	1.77	2%
10/28/12	LNC	0.32	0.48	50%

As you can see, quite a few (though some of these stock I have admittedly sold).

Finally, here are upcoming dividends and expected number of new shares with the reinvested dividends:

Stock	Shares	x Date	Div/Share	Est New Shares
SAI	4,680	1/11/13	$         0.12	46.0
FCX	1,100	1/11/13	$         0.31	9.0
FSC	2,802	1/12/13	$         0.10	24.0
JQC	4,193	1/12/13	$         0.07	28.0
OIBAX	3,960	1/30/13	$         0.06	35.0
O	558	1/30/13	$         0.15	1.0
INTC	1,974	2/5/13	$         0.23	20.0
CSQ	5,482	2/7/13	$         0.07	37.0
AAPL	150	2/7/13	$         2.65	1.0
PGR	2,092	2/10/13	$         0.40	38.0
BHK	2,259	2/12/13	$         0.07	9.0

Oh, one last thing. Maybe the best of all for a dividend investor.  Here is a list of all my reinvested dividends.  You will see that I have gotten quite a few dividends on my dividends.  That is the beauty of compounding.  So just hold your quality stocks, be patient, and watch the money build.

Row Labels	Sum of Cost	Sum of Value	Sum of Dividends	Sum of Gain	Sum of Shares
OIBAX	7,505	8,149	1,206	1,850	1,238
VIVHY	4,843	6,417	109	1,684	296
CSQ	5,250	5,762	302	814	560
JQC	5,156	5,754	315	913	578
KMF	4,536	5,122	180	767	167
PVD	3,237	4,338	121	1,223	39
O	3,159	4,246	324	1,410	101
BHK	3,664	3,928	175	438	259
HFC	3,122	3,638	86	602	83
PRE	2,516	2,974	46	504	36
DLB	2,320	2,284	0	-36	77
INTC	2,386	2,258	71	-57	105
CSCO	2,014	2,214	22	222	109
FSC	2,062	2,186	66	191	202
PGR	2,000	2,025	0	25	92
MSFT	1,875	1,851	52	28	69
JPM	1,494	1,683	12	201	37
SAI	1,376	1,483	12	119	123
SLCA	1,000	1,188	0	188	62
STO	904	1,005	0	101	40
MPC	621	834	6	218	13
WU	196	194	0	-2	15
VIAB	111	122	0	11	2
Grand Total	61,348	69,655	3,104	11,412	4,304