Stock Market Crash 2020
What do we do now? Stock Market Crash 2020.
So, if like me you are pretty recent into your dividend investing journey you may be asking yourself. What now? We are in the middle of a stock market crash due to Covid-19.
First things first do not panic! You have not lost any money!
What I mean by this is that unless you do as many fearful investors are doing and selling all your stocks and shares. You only lose the money when you sell. This is just a blip in your investing career. In 5, 10, 15 years you will look back and wonder what all the fuss was about.
A nice quote, ” be greedy, while others are fearful”. Just because the stock market has crashed means nothing really. When investing in quality companies all it means really is that said stock is ‘on sale’. Meaning we can get a discount of anywhere from 10-30% depending on the company.
Discounted prices also will increase dividend yields while the price is low – assuming the company does not cut its dividend.
I have just finished reading A History of the United States in Five Crashes: Stock Market Meltdowns That Defined a Nation – A very interesting and informative book that goes into great detail how and why the major crashes have happened in the past. It has given me an insight into why these things happen, I highly recommend you give it a read – now so more than ever!
Start investing now
This could be seen as a great time to start investing as once this is all over your portfolio has the potential to skyrocket.
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If you are cautious start slow. Diversify and open several small positions to spread the risk or opt for an ETF that handles the diversification for you. The great thing about Trading 212 is the ability to buy fractional shares of a company sometimes for as little as a few pence. Read my full review and Trading 212 Dividends growth plan HERE.
See my current portfolio on youtube, do not forget to subscribe either to keep track of the portfolio. I am now averaging £30 or $35 a dollars a month in dividends.
Dollar cost average
If you have already been buying shares at peak prices just before the Stock Market crash 2020 then you should be doing what most sensible investors – myself included are doing. Dollar cost averaging or pound cost averaging. Dollar cost sounds more natural so we will stick with that.
Essentially the idea is now that the stock market crash is in full swing we can bring our average cost basis down by buying more shares and re-investing our dividends back into those same quality companies. By buying the shares at a steeply discounted rate on top of the ones we have already purchased it will bring our average cost down.
This is known as dollar cost averaging.
Nobody can time the market and nobody knows how long the stock market crash 2020 will last for. We could all make Stock Market Crash 2020 predictions but they would largely be based on nothing but speculation.
No matter how much people think they can time the market.
Time in the market always beats timing the market long term.
Investing should be seen as long term at least 15 years in my opinion but ideally 25 plus. More time in the market allows the wonders of compounding to really explode your portfolio.
As an example of dollar cost averaging. One of my favorite companies Realty Income ticker symbol O just increased its dividend even during these tough times. At the time of writing, they are trading at $46 per share. My average purchase price is $72 so a steep discount indeed. My average was $75 but I picked up a couple of shares at the discounted rate to bring my average down by $3.
Consistency is key, even if you are fearful during these turbulent times the best thing you can do is be consistent.
Even if you reduce your monthly deposits into your brokerage to give more peace of mind, do not stop investing. Add to your most solid companies and average down. Winners win, losers lose.
None of this is financial advice and I implore you to do your own research.