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Buy and Hold Hard Right Now

As a dividend growth investor following an investment philosophy of buy and hold is really hard right now. It can be hard to stay motivated on the road to financial independence. A core tenant of dividend growth investing is to buy stocks that pay a growing dividend and hold them for the long term to develop an income stream. But the past month has been difficult. It has been marked by a downward trend and high volatility of almost all stocks with few exceptions. For those lucky enough to hold Clorox (CLX) or Walmart (WMT), both of those stocks are up year-to-date as of this writing. In fact, consumer staples and discount or warehouse retailers as categories have done comparatively well for the year. One simply needs to eat and buy essentials even at times like this.

The Bear Market Is Here

All three major U.S. indices are down significantly from their all-time highs. We are in a bear market and the 11-year bull market has ended. On a year-to-date basis, the Dow Jones Industrial Average is down over 30%, the NASDAQ Composite Index is down over 23%, and the S&P 500 is down over 27% as of this writing. The declines from the recent highs are greater. The painful part is that drop-in stock prices have been swift and large in magnitude. The Fear & Greed Index has largely been pegged to extreme fear. This is a far cry from one-year ago or even one-month ago, where Greed ruled the day. Volatility as measured by the CBOE Volatility Index (VIX) is consistently above 75 compared to a long-term average of about 19. Some stocks are fluctuating by up to double-digit percentages.

Buy and Hold Is Hard Right Now When Stocks Are Dropping Like a Brick

It is times like these that test one’s mettle as a buy and hold dividend growth investor. Stock prices dropping 30% or more in one month is not expected in most small investor’s plans. Volatility where stock prices fluctuate 10% or more daily is tough to handle even for seasoned investors. It is painful sitting on unrealized capital losses. But with that said, selling stocks based on market fluctuations is more akin to short-term trading, which most small investors are ill equipped to do…

Disclosure: I am long CLX.

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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.

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