I Dislike Rising Stock Markets

Every week, my wife and I stuff our grocery cart full of food from the local supermarket. 

And obviously, it bothers us when the bill creeps upwards with the rising cost of food.

My dislike for arising stock market, however, is far stronger than my aversion for higher food costs.  After all, a soaring market is a heck of a lot more expensive.

As a 41 year old, I’m still relatively young.  

I’ll be buying stock market assets for many years. 

When prices are low, my  indexes have higher dividend yields, giving me higher dividend proceeds per transaction, which can be reinvested into more shares, which throw off more dividends, which allow me to buy more shares.

A rising stock market is irritating on a few levels.  First of all, I have to pay dearer prices for my stock market assets—a supreme irritant.  Secondly, I receive a lower dividend yield on my new purchases, creating less dividend income for those newly purchased shares, allowing me to buy fewer shares with the dividend proceeds.

I preferred the levels that the markets were at in August 2011

They had fallen to a delicious point, and I happily sold bonds to add to my stock indexes.  But since that date, I’ve bought nothing but bonds because the stock market has ripped upwards.

A few readers have emailed me to ask about the wisdom of buying bonds, suggesting that if inflation rears its head (which they claim it will) then my bond values will drop. 

First of all, nobody knows this for sure. 

If it does happen, however, I’ll be happy.  

My portfolio is a fraction of the size it will be, after I’ve finished collecting stock and bond assets over the next 20 years.  I’d rather pay cheap prices for them, rather than expensive prices.

Young people who hope for rising stock or bond price levels and who quote analysts’ short term projections  aren’t displaying their sophistication, but their inexperience.

You can’t out-think the stock and bond markets.  It’s best not to try.

Rebalance a diversified portfolio with dispassion. Doing so will allow you to always be greedy when others are fearful and fearful when others are greedy.

Best of all, it gives you more time to spend on life’s more important aspects.  Market watching, after all, is a pretty sad past-time. 

Life is too short for that.  Tick tock, tick tock, tick tock.

Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School and Millionaire Expat: How To Build Wealth Living Overseas. My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I'm happy to comment on your questions.

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4 Responses

  1. Chris the Truck Driv says:

    Hi Andrew, Good article, I certainly don't want to buy long term Bonds, since if the Markets drop like you said It creates a great buying opportunity to Rebalance and buy stocks on sale! So what is a good short term Bond ETF that I can add to my Vanguard Roth Ira account? I hope you understand this Question…Sometimes messaging can be a very bad form of Communication! Sincerely Chris the Truck Driver

  2. Excellent article Andrew!

    I love cheap stocks and ETFs 🙂

  3. Barry says:

    Not that I dislike a rising stock market, as I want to have my cake and eat it too (can it rise just after i purchase…please).

    Supermarket prices going up hopefully means more profit for my Supermarket shares, bank interest rates going up would be the same, it also and hopefully an improving economy

    The only Index type fund I currently have is http://www.bloomberg.com/quote/STW:AU the ASX 200 ETF and I'm considering adding to this

    Great site Andrew, I'm learning a lot as I persuse the archives and enjoy the regular updates, contributions/comments from others and your responses

  4. Hi Andrew, happy belated b'day. You might want to check on the Terms of Service Page cause the page's not found and it just redirects back to the home page. Cheers, LCF.

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