The psychological stress of buying stocks

I remember buying one of my first stock holdings, General Dynamics. I had done hours of research. I can still remember the week I was in San Francisco, stomping around to restaurants, reading gobs of investment articles and reading fundamentals reports. In fact, it was all I could think of even as I ate fantastic sushi every night.

When I bought my first position in General Dynamics, the price was about $72/share. And like clockwork the price dropped to $66. Doesn’t it seem to alway do that?

Suffice it to say, I felt a strong, negative reaction. I understood why people panic and sell their holdings in a very real way. I had ready about that phenomenon, but not really experienced so directly.

But I didn’t sell. I knew General Dynamics was a solid company with strong business underpinnings. They are a leading manufacturer of aircraft and avionics among other things. Bottom line: nobody is going to stop buying aircraft, commercial or military, in the next fifty years.

Instead, I put my attention on other wealth building plans. Or should I say, I focused on other facets of my overall wealth building plan.

It took almost a year for the price of General Dynamics to get back to where I had started. But here’s the key: I wasn’t shopping for price. I was looking for dividends. And they were paid on time as expected. Today the price of General Dynamics is around $87.

Now when I buy stocks, I don’t feel the same concern when it goes negative the day after I buy a position. Instead, I count the days to my next dividend payment. I now almost crave dips in the prices. It’s an opportunity because my profit isn’t in price the dividend yield. That’s where a more reliable form of money can be made when you are buying stocks. My wealth building has been going great and cash flows are rock solid. I couldn’t be happier, and I know I made the right decision back then when I took the plunge.

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