We’re in an interesting season.
Just recovering from the dang COVID19; and the aggressive Russian dude decides to invade Ukraine; both of these is causing more world, economic, power and food issues.
People are more uncomfortable and fearful; interest rates are going up and some items are going on discount. But it’s funny.
When an item you like goes on same, be it steak or phone or flights, do you get scared to buy it?
Of course not.
- iPhone on sale? (lol never) — buy more
- favorite steak on sale — buy more
- flights on discount? Let’s freaking gooooooooo
- so many more examples
So when it comes to dividend-paying stocks or appreciating assets, why do we get jelly feet when their prices drop?
I get it, we get scared thinking or feeling that “maybe the price will drop further, so we’ll wait a bit”.
We then wait a bit, and the price
- goes down, we get more scared, thinking the price may go down further, and we dont do jack shit
- goes up, we think it’d go down again, so we dont do anything
Regardless of price action, net-net is we didn’t take the opportunity to buy some appreciating or dividend-paying assets on discount.
How to work around this psychological and emotional fear?
#1: Dollar cost average into good projects.
Find the good projects that you like (yes, you got to do some research) and then carve out a monthly budget so you can buy it monthly, be it price up or price down. At the end of the year, you’d get a median price. Research shows that this approach is the safest approach and most effective to bypass our natural innate (and irrational) fears.
#2: Use some metrics to support such as NAV and PTB
Sounds a bit geeky and technical, but what this means is that
- NAV = net asset value
- PTB = price to book ratio
These are quite interlinked; and to me more importantly, is PTB or price-to-book ratio. Most of the time, PTB means that if a company you wish to buy into, have $10000 in assets, so the shares should reflect $10000 value at least right (other than operational / sales activities). Sometimes the assets reflect $10000 buuuuuuuut the shares may reflect as $5000 instead of $10000, so that means the PTB is 50%.
To me, that’s a beautiful and delicious 50% discount (assuming this is a fair to good company of course).
That’s it, and DCA from hereon, month-in-month-out, into assets that push cash into your pocket or grow in value year-on-year.
I’m the founder and writer here at NigelChua.com; as well as serial entrepreneur, therapy business entrepreneur, digital entrepreneur, investor and also happy husband, father and Christian.
Started and sold off a business for 7-figures; built another 7-figure one and growing it further, plus building/investing into other businesses and investments as well as advisory works.
Nowadays I share and teach entrepreneurship, financial independence, retiring early as well as building and living a life you love.