Embracing volatility to strengthen my investment portfolio
Over the last few weeks, stock markets got hammered due to “trade war rethoric” and the Turkey currency crisis.
From the perspective of a buy and hold investor that’s nothing to either become too afraid of nor to get too excited about. Although stock markets as a whole still remain richely value (remember, the bull market is running for almost a decade) the current share price retreats can provide some nice buying opportunities.
I am a passionate dividend growth investor, I want to further strenghten my stock portfolio, year by year producing more dividends, one day being strong enough to support our costs of living.
I’ve built a stock portfolio consisting of over 50 positions with a market value of around USD 200’000 churning out USD 6’500 in dividends for the current year. I’ve not sold one single stocks in 10 years. I’ve held my positions through thick and thin and keept my investment portfolio growing.
Being in the accumulation phase, I get interested when stock prices come down. That’s when I am committed to put even more money to work by buying more stocks.
That’s why I recently invested USD 8’600 in stocks of two strong businesses, increasing my forward annual dividend income by around USD 400.
Topping up my stock position in British insurer Aviva
Aviva is a company I have had an eye on for years. I initiated my position late in 2017 and have almost quadrupled my holding since then.
Aviva has shown good progress in increasing its top- and bottom line results over the past years and is substantially improving its profitabiity. The first semester 2018 has shown operating earnings growth by 4% and a dividend increase by 10%. Moreover, Aviva launched a share repurchase program in May.
British insurer Aviva is a high quality business and its stocks perfectly fit in my investment portolio.
Initiating a position in BASF
BASF SE is the world largest chemical producer with following five segments:
- chemicals (it’s the the largest segment with the highest EBITDA contribution),
- performance products (Nutrition & Health etc.),
- functional materials (e.g. services and products for the the automotive and construction industries),
- agricultural solutions and
- oil and gas (that segment has the highest EBITDA margin)
BASF has a very diversified business model with growth prospects that look attractive to me. For instance, BASF is acquiring Bayer’s seed and non-selective herbicide businesses (which is part of the latter’s plan to acquire Monsanto as Bayer has to divest some assets).
For me, BASF stocks represent a solid long-term investment opportunity after they have come down roughly 20 % over the last months.
What about you, fellow Reader, did you make some nice stock buys? What do you think about my stock acquisitions of BASF and AVIVA?
Disclaimer
You are responsible for your own investment and financial decisions. This article is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
hi,
I will look up Aviva, BASF is a really good investment, I will stock up on it, especially as the Euro has become a bit cheaper recently.
Keep up the good work, love your blog!
Maximiliane
Hi Maximiliane
Thanks a lot for your nice feedback and continuous support!
Yes, Aviva and BASF are definitively worth considering as investments. You’re making a good point with regard to the exchange rate aspect: the Euro – and the GBP as well – have come down quite a bit against the Swiss Francs which makes investments in EU- and British stocks even more attractive for us.
Cheers
Financial Shaper
Hey thanks for the grear read and sharing your portfolio info!!
Im not a strong believer in die-hard buy-n-hold, as i think there can be huge upside to accomodating long-term market cycles.
For instance, you wrote we’ve been in a bull market nearly 10 years, and you havent sold a stock in over 10. As it becomes exponentially more likely we enter a recession as the years go on, doesnt it make sense to withdraw from the market?
Yes, you could remain invested and earn 3.25% dividend income over a year, but doesnt it make more sense to anticipate a 20%+ recession within the next few years? And if so, isnt there far more upside to avoiding the hit to the portfolio, and reinvesting at a lower reentry point?
I played the crypto markets and saw the same thing and it really paid off.
Instead of holding through the dips, im trying to buy low sell high in ~7 year cycles in the market.
-CheckoutSaver
Hi CheckoutSaver
There are so many different approaches to make money with investments and you’re raising very interesting points.
I’d agree, there is a huge potential of long-term market cycles and yes, it would be great, if we could predict the next recession to fully withdraw and re-enter the market at the bottom. The problem in my view is that we cannot know, WHEN exactly the next recession hits, how strongly it will impact the stock market, how long it will last and when the bottom will be reached. There is also a huge risk in my view to miss out the upswing and re-enter too late or even worse not to get into the market at all. For instance, I know some people who sold huge positions during the turbulences before the BREXIT vote in 2016 and guess what: they are still waiting at the sideline. They left the market out of fear. Emotions are pretty dangerous when it comes to investing.
I have to say that I would be just terrible at market timing. I have neither the time nor expertise. But my strengths are a very consistent savings- and investment process. I work hard to set the focus on strong businesses that should be doing ok during a recession. And time in the market is extremely powerful, the compound effect is very rewarding.
Over the years I worked on giving my portfolio a pretty defensive shape, for instance almost 40 % are invested in consumer staples and pharma businesses. We have to be prepared for the next recession, that’s for sure. For instance I have also set aside a separate cash pile just to take advantage when markets thank 50 % or more.
Appreciate your commentary, thanks for stopping by!
Cheers
Hi FS,
I admire the consistency of your investment strategy. Can’t say anything concerning Aviva, as I haven’t looked into it yet. However, BASF is a solid buy and fits well into your portfolio.
We haven’t been very active on the buying side lately. Our last purchase took place in January 2018. However, we continued to put some money in our global ETF portfolio.
– David
Hi David
Yeah, I am very happy having initiated a position with BASF. AVIVA is one of my favourite insurance stocks but of course it also has some very specific aspects to be considered.
With stock markets still being richely valued it makes perfectly sense to be very selective, you are making a good move in my view, building a nice cash pile to take advantage when price levels are more moderate and in the meantime investing in a broadly diversified ETF.
Keep it up and thanks for stopping by and commenting.
Cheers
Great post. Thank you.
But most fund managers dont buy stocks only based on FA. Research shows that most investors equally use TA such as trend, support resistance, fibonacci retracements and volume analysis.