investing

Doubling Down

| May 1, 2020
free stock
Photo Credit: Keith Knoxsville
A Hen and a Drake Green Teal on the truck bed. Not a limit on anything, but a fun morning out.

Maybe you aren’t invested in the stock market, and watching what its doing lately, you wonder why you would want to be. Or maybe you bought 1 stock 5 years ago for $30 and it is now trading at $8. You could lose your mind, sell, and accept nearly a 75% loss. Or you could consider it an opportunity to buy that same stock again today, at a MASSIVE discount.

Oh by the way, if you want a free stock, or maybe two free stocks, and don’t care to read to the end. Here’s the link. Open a Webull brokerage account and receive ONE (1) free stock! Deposit and get an additional free stock!. Webull is running a really smart promotion where they are giving people free stock for new signs ups, and to share the word about Webull, instead of wasting money on other traditional marketing methods.

I look at investments in the stock market, as long term investments that will pay me dividends. Long investments don’t try to time the market. And neither do I. Except, I do take some guesses as to how I can average my cost of a position in a stock to be as low as possible.

What that means?
That $30 stock is now a dismal $8 stock. On the bright side its on sale for 73% off! If you have confidence in that company’s stock to recover to two thirds of its pre-crisis price you should consider doubling down. Not exactly, and not quite literally though. Check out the example below.

What happens if you buy 3 more of that stock at $8?
Buy 3 shares at $8 for a $24 dollar investment, plus the original $30 stock, for a total investment of $54.
– Effectively you nearly double your total investment in the stock.
– If your stock pays dividends, you’ve quadrupled your dividend payment.
– Your average cost of that stock is now $13.5 per share… Not $30.

Yes its still a loss right now. Your cost was $54 for a market value of $32. However, at an average cost of $13.5 that stock only needs to recover to $19, not a $30 market price to break even. Everything beyond that point is an increase in wealth in the form of appreciation. Also, consider you will now quadruple any dividend payment by having 4 positions, instead of 1. In a normal market, that would be a huge fluctuation, but in an economic dip with massive volatility, and prices at all time lows, its more than likely companies will recover, and so will their share prices.

Everything I’ve mentioned I’ve tried to keep simple. It takes into account a few simplified principles like ‘dollar cost averaging’ and a more fun one ‘Buy the Dip and Sell the Rip‘.

I have a long term investment plan, I don’t sell the highs, unless I lose confidence in a business or investment and move my position to another stock, index fund, or ETF. I also typically focus on buying higher dividend stocks, and try to increase my position by buying frequently, and even more-so when stocks are on sale, like they are right now.

Disclaimer! I am NOT a professional. Nor am I a financial advisor. I am not offering advice, I am offering up my experience, and what I do to never worry about my investments. In fact, with my approach, I see markets dip and I see it as a huge opportunity to increase the amount of dividend payments I will receive for a smaller investment than I would have had to make a few months ago.

If you aren’t investing, get started. Open a Webull brokerage account and receive ONE (1) free stock! Deposit and get an additional free stock!

I wasn’t above signing up to take advantage of a free stock. I also funded it the minimum $100 to get a second free stock. I would consistently be funding and buying through another trading platform anyway. I actually, received stocks that are worth $16, for signing up, and then for doing what I would have done anyway.

So get started. There is no reason not to. Also, take the time to learn. Learn about the businesses you want to buy shares of. Read about dollar cost averaging. View the dip as an opportunity, and take advantage of it.

Stay healthy, and get wealthy!

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