Joe's Journal | Financial Independence

This is the worst time to invest in the stock market. I would hate to own stocks right now. You’re crazy for buying stocks right now, there’s so much uncertainty. This is the worst crash since 1987.I could go on, and on, with all the statements I have heard from friends, and people that hear about our plan to invest money during this economic hardship caused by the coronavirus. We are far from leaving unscathed by the recent economic downturn due to concerns and fears of the COVID-19, but this does not deter our plan. If anything this actually helps us. But...

Let’s get some quick background on what has happened.

The stock market has dropped by double digit percentage points in a single day, and also increased by the same amount on other days. Undeniable volatility. What the stock market and investors will do in this recent outbreak is unpredictable. Most recently, it has continued to decline by at least 5-7% each day. One thing is certain, most people have lost a lot of money due to the drop in the stock market, or at least they did if they sold their stocks. Many investors are panicking, selling their shares at a loss to “stop the bleeding”, which can generally be attributed to emotional investing. Emotional investing is normal, and a fairly human reaction. We all work hard to make our money, and then we try to invest it to make more money. When we see our hard earned money drop, we try to stop it by any means necessary. So we sell our shares and pull our money out of the investment.

That doesn’t make it the right choice. We only invest the money that we are not attached to. Money that if for some reason the stock market crashed tomorrow, we would still be okay. Would it cause a lot of impact in our lives? Sure. Will it crush us financially? Not at all. This perspective and approach to investing is what allows us to change our approach to investing in comparison to others. This actually spurs more action from us than anything else. Which means we have become even more active in this financial turmoil.

So why have we doubled-down in our stock portfolio?

With our pursuit of financial independence, we initially turned 100% of our focus on debt. This took approximately 1 year. From that point on, we wanted to figure out what would return more financial freedom, and after some bouncing around, we settled on stocks. Which, at that time, the stock market was in one of the longest bull markets in history (my definition of bull market: when everything is going great). Almost any form of investment would return positive returns. This meant that initially, we had to buy stocks at a higher price than we would like, as the stock market as a whole was increasing at a wonderful rate for most investors.

Remember, our strategy:

Dividend x Shares = Paycheck (with this paycheck we then buy more shares)

The recent economic turbulence has dropped prices significantly. This has allowed us to purchase more shares of stocks with the same amount of money. Since we are focused on dividend based stocks, that means more money paid to us on these dividends. While the drop in the stock market has affected our initial investments, we aren’t necessarily concerned about our investments.

“You should be, that’s a big drop in your investment!”

Yes, but no. The companies we have invested in haven’t had any changes to their business. They are still making products that consumers and businesses purchase, in some cases this outbreak would mean people buy more of these products. These companies have paid dividends through the housing market crash, and the 2000-2001 bubbles, and the 1987 crash. That provides us with confidence that these companies we invested in will endure this recent stock market decline. If any company has shown they can survive a strain like this, these companies have. Heck, that was why we avoided some companies given their lack of a historical performance in economic hardships.

We stay the course

Recall that our formula of investments does not include the share price. The only thing the share price indicates is how expensive it is to own a share. A lower share price simply means we buy more. With the confidence in our companies that we invested in, we have decided to not only keep our money invested in the companies, we have decided to buy more. Since the market has declined by 10-15% in the last couple weeks, we have been able to purchase 10-15% more shares. In a sense, this decline in the market has actually helped our goals, and pushes us a bit further than we were originally planned to be at.

We’ll keep riding this one out, and continue investing in this more difficult time.

Stay safe, healthy, and smart about how you handle the outbreak of coronavirus. During times like this, more than ever, it’s important we remember that we are all in this together.