November Stock Purchase – Drawdowns and Mental Strength

November was not a month for the faint-hearted. Stock markets across the world fell due to macroeconomic tensions. Growth stocks in particular were severely hit. The leaders of the current bull market – Apple, Amazon, Alphabet (which I bought), Facebook and Netflix – were all down close to 20%. And when these stocks get hit, all other stocks feel the force as these stocks have the highest weighting on the most important index of them all – the S&P500.

All this is to say the chances are high that your portfolio performed negative over the months of October and November. This is nothing to be too concerned about. Having drawdowns is a normal part of the market. Markets crash all the time. You should, at minimum, expect stocks to fall at least 10% once a year, 20% once every few years, 30% or more once or twice a decade, and 50% or more once or twice during your lifetime.

Now you might ask yourself, ‘why do stocks have to crash?’ The better question would be, ‘what would happen if stocks didn’t crash?’. Let’s think about this. If stocks never crashed – or if they gain the perception that they don’t crash – prices would rise so high (as everyone would be bidding them up) to the point where a new crash was guaranteed.

In short, markets will always crash. That is inevitable. It’s what you do about it that will determine your performance over time. If you panic during crashes and sell, you will be left with mediocre returns. If you simply hold on and wait for a recovery, you will be left with good returns. And if you buy when there is blood in the streets, you will have excellent returns.

My philosophy with my monthly stock purchase programme (LINK) is to just keep adding assets to my portfolio. Getting rich via the stock market is easy. Just continually purchase a diverse set of income producing assets. That’s it! This idea seems simple because it is simple. And that is exactly why most people don’t follow it – they think it is too simple to be effective.

November Purchases

The following are the stocks I bought in November

  • BAT – Bought 34 shares at £29.76 a piece. Dividend Income £66.30
  • Spectris – Bought 9 shares at £20.08 each. Dividend Income £5.22
  • Vodafone – Bought 109 shares at £1.46 each. Dividend Income £14.51
  • XP Power – Bought 9 shares at £24.70 each. Dividend Income – £7.20

All in all, I managed to add close to £100 in dividend income during the last month.

Looking at my portfolio as a whole, I am now expecting to receive £2,925 in dividend income over the next year. This is amazing. I make £8 just for waking up every morning. Owning shares in great companies is a wonderful feeling. I am also not much of the £3,000 in annual dividend mark which I hope to hit before the end of 2018.

The big purchase this month was BAT. The company has been hit by the proposal to ban menthol cigarets in the US (where it gets 15% of its earnings from) and some patent litigation issues with Philip Morris around its Glo device. From my perspective, I feel the worst possible scenarios are already baked into the share price. BAT is going cheap right now. It is traded at a P/E of less than 10 (although this is higher when you factor in debt). But at these prices, long term holders will benefit from the underlying economics of this great business. People buying today will smile in 10 years time knowing they were able to get one of the top 70 companies in the world at a great price.

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