Investing and emotions don’t belong together. They never have and they never will. In fact if you want a sure fire way to lose money while investing then by all means let your emotions make your decisions. However if you are in it for the long haul and just want to grow your wealth by smart investing then hang on for just a second here and listen to me. If you’re more interested in freaking out over the 634 point drop in the Dow Jones Industrial Average (DJIA) yesterday (August 8, 2011) then please head back to the Debit versus Credit blog and find another post to read.

I tweeted this yesterday after the chaos had ended on the open markets:

Investing and emotions don’t belong together. Ever. If you’re letting your emotions get involved then trust me, you WILL lose money.

It’s as true now as it has ever been. Studies have repeatedly shown that if you let your emotions rule you will always lose money. By pulling out after a large loss you may indeed avoid losing even more, but don’t forget one thing here. If you have your money invested in stocks, mutual funds, etc. it’s all paper losses. You don’t actually lose anything until you cash out. So after the 634 point drop you initiated a sell order for your stock or a mutual fund. Before it wasn’t really a decrease in your cash holdings. Now that you’ve sold it is. Maybe you’ll get lucky — maybe the market will continue to drop another 10-15% before finally rebounding. Or more likely you’ll sell now and the market will rebound by the end of the week. Your paper losses would have disappeared, but you cashed out. So now you’ve really lost money, while those of us who stayed level-headed are back to where we were (much better than a loss isn’t it?).

Here’s the trick to avoid emotional investing

Don’t check your bloody portfolio every day.

Seriously. Especially if you hear about a down day on the market. Don’t check your stocks, don’t check your 401k. Don’t check any of your investments! If you don’t check them you can’t freak out about the “paper losses” and you won’t ever lose to your emotions and do something that will compromise your ability to build wealth.

Another thing. If you aren’t already taking advantage of dollar cost averaging through automatic investing you’re missing out on the ability to take advantage of great buying opportunities. Make sure you get that set up if you haven’t already. Now get out there and don’t let the market volatility freak you out. I’ll be watching.

picture courtesy of Icanhazcheezburger

Image Courtesy of WaxyPoetic @ Flickr

You’ve likely heard the phrase, “cash is king.” To be sure cash is important, not only to companies but also to individuals. Without it we’re bankrupt and in a world of hurt.

The dividend investor takes the phrase “cash is king” very literally. They invest a good majority of their portfolio in anything that pays them dividends, or cold hard cash. This could be a stable stock with a good dividend yield, a mutual fund such as the T. Rowe Price Dividend Growth fund or even, gasp, bonds.

In difficult times such as these it can be comforting to know that even if your investment loses value, you’re still earning a dividend just for owning it. Stocks such as GE, JNJ, MSFT and even T are good examples of stocks that have a good dividend yield and (as far as I know) good long-term stability.

Are you a dividend investor? Do you choose investments based on if they offer a dividend payout or a similar cash payment? I personally don’t have much invested in divided stocks, but I’m always looking to expand my portfolio. I’d love to hear your thoughts on dividend investing!

I don’t often disclose any of my investment decisions here on Debit versus Credit. With that being said I would like to disclose that I have made a small purchase of shares in GE. I wish I could make a larger investment (at least 100 shares), but at this point I’m in no position to do so. What I did do is buy 20 shares of GE at 11.76 a share. I already owned 10 shares in GE, but at the prices that it’s at right now I just couldn’t refuse to pick up a little bit more.

Let me tell you what made me go ahead and bite the dust.

GE at it’s current price ($11.81) is offering a dividend of $1.24 per share, with a yield of almost 10% (9.8% to be more precise). While the stock market may not be going higher anytime soon, and in fact could end up even lower than the point it’s at now, I’m not really worried about my shares in GE because for now I’m earning a 9.8% return on my investment. I’m also not worried because I’m in this for the long haul and have no plans whatsoever to sell this investment for at least 5 years.

Here’s what could go wrong.

GE could slash their dividends. This would effectively undermine part of the reason that I even bought the stock in the first place. While I do appreciate GE as a company and believe their stock price will be much higher in five years than it is today that doesn’t mean that I am not worried about their dividend being cut. However they seem to be in pretty good shape financially and based on my limited experience I’m making a bet that their divided won’t be cut. I should note that I’m not expecting it to be raised either.

Assuming that the dividend on GE isn’t cut I should be making a cool $24.80 a year on my initial investment of $235.60. You won’t find that kind of return at a bank.

I saw an interesting movie on TheStreet.com today about GE and Dow Chemical and their promise to continue to pay dividends on their stock. I actually hold some shares in GE and so I was interested to see what TheStreet had to say about their pledge to continue paying out dividends. Check it out.

I have a question for you now. If you are investing right now, do you base any of your investment decisions off of any dividend payments?

The market has been more than crazy over the past several months. It’s a bit depressing to look at all of the losses that I’ve had, at least on paper, but I know that eventually it’ll all come back. Nonetheless it’s definitely scary out there for a lot of people.

I’m interested to know how all of you are responding to the current market conditions. What are you doing with it being so crazy out there?

I’m still throwing just as much into my 401(k) but I’ve not done any individual investing in stocks or any mutual funds for about a month now. The reason for that is mostly because I’m saving cash for certain upcoming expenses. I’m definitely curious what you’re doing and I would love to hear your comments as well!

Good luck out there!

After 9 months of almost absolute silence from me regarding what sort of investments I have made, I think it’s about time that I present to you my stock portfolio.  I own shares in 9 different companies.  Some of my investments may not have been very wise at the time, but I’m under the impression that rather than selling for a loss I should hang on and see what happens.  Truthfully I’ve started rather small and don’t have much to lose, but I do have a lot to gain.  So without further ado, here you are…

As you can see I’m hanging on to AAPL, BAC, BX, C, GE, JSDA, RIMM, SIGM, and V.  The largest loss I’ve taken at this point (dollar wise) is AAPL, but it’s a long-term move in a company I love so no big deal.  In fact I just bought another share of AAPL the other day at around $161 – so I’ve done just a wee bit of dollar cost averaging.  As I continue to build up my cash I’ll be moving more and more money into stocks – especially now that the market is down so much.  Stay tuned then for future stock portfolio picks.

What are you holding?

I was talking to a friend of mine the other day about investing. She just recently received her tax refund and had yet to “spend it” as she said. Naturally I suggested that she invest it. We got to talking about what she might invest her money in and since she has absolutely no investing experience I suggested that she might consider a mutual fund. She had heard of mutual funds before, but wasn’t exactly sure what they are. Of course I told her she should read my blog post about mutual funds, when suddenly I realized I didn’t have one. Thinking that it was really quite irresponsible of me to not have covered this topic as of yet, I am now going to right this wrong. Welcome to Mutual Funds 101.

What is a Mutual Fund?

A Mutual Fund is a diversified portfolio of investments… essentially a ready-made, specifically focused, investment portfolio. A Mutual Fund is a large pool of money which is used to invest in stocks, bonds or other securities. Mutual Funds are attractive to a large number of people because it is easy to purchase shares and they are great for investors who do not have the time or the desire to create their own diversified investment portfolio. Mutual Funds are usually geared towards one of three different goals: income, growth or a mixture of the two. An income fund invest mainly in – you guessed it – income investments such as bonds, preferred stock and income-oriented common stock (stocks that pay a high dividend). A growth fund invests mainly in high-growth (often small or mid-cap stocks) stocks and other types of growth investments. And finally the growth/income fund would invest in a mixture of these types of investments so as to provide a stream of income to the investor as well as potential for future growth.

How do I purchase a Mutual Fund?

To invest in a Mutual Fund is similar to investing in the stock of a company. Mutual Funds are sold by the share, just as stocks are. The Net Asset Value (NAV) of a Mutual Fund refers to the value of just one share of a Mutual Fund. This NAV is updated daily. Investors have two choices when it comes to investing in a mutual fund. They can purchase shares of the fund from the fund company directly or purchase shares through a brokerage account.

If you already have a brokerage account you might consider purchasing shares of funds directly through your brokerage, so as to keep all of your investments in one “place.” One thing to keep in mind is that some brokerages charge a flat fee to invest in a fund. This fee might make it more practical to purchase directly from the mutual fund company.

Some brokerages include E*Trade, Scottrade and Zecco Trading. Some great Mutual Fund companies include Vanguard and T Rowe Price.

Update: A great place to do research on mutual funds is over at Morningstar.com