Cory Diary : Market Drawdown Logic

Dividend Investing always have the idea that as the stock get cheaper we can buy more shares cheaper. At the same time we get more and more dividends. Capital loss is not meaningful as there is confidence the price likely returns if is not short term even long term we can wait. This is logical when the business fundamental is not significantly impacted and we are still seeing the cashflow coming in to provide dividend. Collecting dividend while we wait is a very happy exercise mentally.

Bottomless Pit

What-if is growth stock that hardly has any dividend ? This becomes tricky in market drawdown. In growth stock, PE can move from low to high gear and back. What this mean is money created out of thin air or vaporize with sentiment as money is not in the pocket literally. Strong companies will not escape punishment even with almost perfect score as people will still focus on the imperfect and blow it off with broad market. People who continues to average down in a down trend market will be suffering for a long time mentally. There is no base support. It can be a bottomless pit as valuation is just a paper exercise till something change the course.

The market is well known to be 6 months ahead. So if rates impact till year end means Early June is the time we re-evaluate our thoughts again. So much on Growth Stocks. Needless to say is not the same logic as dividend investing. Our brain needs to switch a bit on this and timing maybe critical even when we cannot do well on it. As usual exception always applies just in case someone like to shoot my thought.

Cory

2022-0430

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