Don’t worry; it will all be okay. This is not the first crisis; it won’t be the last. The best way to handle this situation is to push through it confidently.
We can use their philosophy with anything and life, and we should. In today’s case, we are talking about dividend investing during the coming 2023 recession.
Throughout March 2023, three major banks closed their doors. This scenario has caused turmoil in the financial markets and the economy. How do we continue to invest into the madness?
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Staying grounded. The most critical aspect of any expected situation is to remain calm. I am a US Marine, and staying calm always rings true.
Don’t make any rash decisions about your finances. As a dividend investor, you probably already know these processes.
However, it’s always good to reinforce your ideas through a panic. Trust me; my wife and I have close to $300,000 in the markets—a lot is at stake.
Protecting your capital. Protecting your money is always the top priority; however, that doesn’t mean taking your money out of the market.
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Diversification is your best friend in dividend investing. Currently, banks are getting the short end of the stick. During the 2020 pandemic, it was hotels, airlines, malls, and office REITs.
The best way to protect your capital is to keep your money invested. If you are a capital gains investor, your scenario may be much different.
A lot of my money is solid blue chip stocks like McDonald’s (MCD), Johnson & Johnson (JNJ), Public Storage (PSA), Costco (COST), and Starbucks (SBUX).
However, the majority of my money is in income investing products like closed-end funds. These investments are getting absolutely hammered. However, I am not losing a wink of sleep.
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I understand why the market is pummeling these products. The federal reserve raised rates so fast, from 0% to 5%, that it changed the entire investing game.
Understanding the current crisis. To be an investor, you must understand the world of economics, interest rates, and flight to safety.
Many banks are in crisis today because they bought tons of Treasuries with 1-2% yields. Now that rates are at 5%, these Treasuries would sell for 60-70% of their value.
On top of that, banks use Treasury and MBS yields and other investments to pay our bank interest. I earn 3.6% on my high-yield savings account, but the bank may only earn 1.6% from their Treasury Bonds.
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There is trouble in the water. The mainstream media needs to create a new hysteria to keep the cycle going. If you have FDIC insurance, you should be fine.
Adding new capital. What about adding new capital into the stock market? Well, it is a great time to build a dividend portfolio.
In fact, you can actually create an excellent 60/40 stock and bond portfolio at this very moment. Let’s say you have $10,000 to invest.
You can grab some great blue chips like Visa (V) and Mastercard (MA), some income like Pimco CEFs PDO and PDI, and some 5-year Treasury Notes yielding 4%. Not too shabby.
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If you don’t want to add new capital, you can continue to use dividend reinvestment to grow your portfolio. That is the magic of dividends; they just keep coming.
Using margin. Avoid using margin at all costs. Yes, there are some fantastic deals out there. I just bought a few more shares of Wells Fargo (WFC).
I considered using an extra $1,000 in my savings account to purchase more Wells Fargo. However, this is not the time for shenanigans.
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We don’t know the future, so I used $100 on Wells Fargo. I tampered down my FOMO and played the safe hand.
Using margin is 100% FOMO and speculation. If you are a day trader, this is your life. Using margin can ruin your life quickly if you are the average person.
People can control the markets. We are the little people in this scenario and must invest as such. The “powers that be” are manipulating the markets.
Mortgage rates went from 3% to 7% in about eight months. Banks spent 13-15 years buying Treasuries yielding 1-2%; then rates went to 5% in one year. This wiped out their entire portfolio of bonds.
Hedge your bets. No, don’t hedge your bets on the stock market. If you understand stock options, covered calls, and cash-secured puts, have at it.
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The best way to hedge your bets is by investing in yourself. Yes, it’s time to upskill and create new streams of income.
I love my dividend portfolio because it pays me $1,300 to $1,500 monthly. However, earning $200 from my books and website is the key to staying calm.
Now that I have developed a new talent for writing, editing, designing, and publishing, I can increase my income on a whim.
I can create money from thin air by hosting a design class or helping others self-publish a book. In short, my mind can make money faster, safer, and better than stocks and bonds.
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If this sounds like too much to handle, get roommates. You can make a cool $1,000/per month to invest in the markets.
Conclusion. There will always be some form of hysteria, manipulation, or crisis. This is how they get people to transfer their wealth into the hands of the ultra-rich.
What did we think would happen as we started quietly quitting and demanding remote work? Now, they are looking to put us back in our place.
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And I agree with them. The average person has stopped learning and growing. We depend on our company and government to do all of our critical thinking.
Every time we shift our money around, someone is getting richer. Now, they have us scared to keep our money in banks. This creates the perfect backdrop for them to introduce Central Bank Digital Currency (CBDC).
I’m not here to create conspiracy theories but promote reading. If you start reading Seeking Alpha daily, you’ll begin to identify trends.
The best way to avoid turbulence is to understand the process. The economy had too much money, and now they want to drain it.
However, these are profitable events if you think long-term. This round of carnival games will produce another cohort of millionaires. You can join them or live in fear. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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