Is There Ever a Time You Don’t Add New Money to Your Portfolio?
May 18, 2021
When stocks struggle some people see that as a buying opportunity while others view the situation as a time to back off. It’s easy to see why people would fear entering a volatile market or why they would be afraid of buying when markets are flying high, but that’s generally not how the 7investing team sees things.
Steve Symington and Maxx Chatsko joined Dan Kline on the May 17 “7investing Now” to share their investing strategies. These are long-term investor values that fuel their investing philosophy when times are good and when their investments struggle.
A full transcript follows the video.
Dan Kline: Question number two, and I’ll start with Steve, on this one. “Is there ever a time you don’t add new money to your portfolio?”
Steve Symington: I mean, when I don’t have it, I guess that’s it. But, this is a great question because, you know, it sort of touches on something that I’ve kind of tweeted about of the last week, sort of the wealth hack tweet that some of you might have remembered. It’s, it’s what you should do is just continuously add to your portfolio month after month, as your cash flow allows, take any money that you can live without for a couple of years, and put it to work in the stock market every month.
No matter what just find some good high-quality companies, the rest kind of takes care of itself, you know, and I see too many people that say, Alright, I’ve got $5,000. And they put it all in the stock market all at once. And then they’re mad when all of it pulls back at once like, well, just buy continuously for your entire life. And these dips in these spikes, and all of it just sort of evens itself out. If you’re buying shares of great companies at reasonable valuations. And just continuously.
Dan Kline: Yeah, I’ll chime in and say that two of my 7investing picks are incredibly solid companies that have had really strong earnings reports. And for market sentiment reasons, the stocks haven’t performed that well, that eventually catches up where at some point, the analysts going like, “well, they’re not gonna be able to do that, well, next quarter”, doesn’t play out, or bad results get interpreted is surprisingly good. And you have the opposite effect, you really can’t look at quarters, you have to look at years, Maxx Chatsko, your thoughts on this one?
Maxx Chatsko: Same as what Steve said, you know, only time, you know, add is when I don’t have the money. But maybe you know, here, let me pivot this a little bit to like younger investors, right. I’m the youngest on the team. Just rub that in one more time. But like, like, you know, when you’re in your 20’s, or whatever, you don’t always have money, or it feels like so, you know, like a futile uphill climb, like, I’m gonna put $100 bucks in my portfolio every month, or maybe it’s only $50 bucks.
But do it, do it. I mean, if you order out food, like, you know, four or five times a month, maybe three times a month, maybe cut back on one time, that’s $40-$50 bucks, you have. And again, it seems like such a small and insignificant amount, but you know, $50 bucks a month, that’s $600 a year, by the time you’re 30, which is what age I am now, just rubbing that in one more time. You know, that adds up, that’s, you know, thousands of dollars and the power of compound interest really plays out there. Plus, you’re forming good habits. Maybe you have more money by the time you’re 30 hopefully, and you’re putting more in every month. So you know, form those habits, and your future self will thank you.
Dan Kline: If I could go back in time, the number one thing I would do is in my 20’s when I was making no money and living in New York, I would put that $50 a month in. Now it wasn’t as easy to do back then there wasn’t commission-free trading. You really kind of had to use a broker, a broker didn’t want to deal with, you know, my $50 investment. But if the conditions were what they are now, I would go back and make those very, very tiny investments. Because now that I’m in my 40’s, you know, I’m more than a Maxx-and-a-half here, there are I don’t have that timetable. I can’t say like, well, when I’m 87, I’ll be able to use some of this money.
Well, as much as I hope to work forever and never, quote, “retire”, by 87, you might not be able to make a full income, you might not be in a position, you might just be tired, like, I don’t usually get tired. So, you know, that could change in the next 40 years. So I have to sort of plan on that normal like 67-70 needing some of that money. So you know, the compounding isn’t as long but no matter what age you are, it is always a good time to invest.