Why A 200 Point Drop in the Stock Market Doesn’t Matter

Well, a 200 point drop in the stock mar­ket doesn’t mat­ter to your Elephant.

Let’s take our sam­ple port­fo­lio. Our sam­ple port­fo­lio started about a year ago with $60,000. Our Elephant’s Paycheck was $1,760 (annu­ally). Currently, our Elephant’s Paycheck is $2,040.

It was $2,040 yes­ter­day morn­ing when we woke up. It was $2,040 when the mar­ket closed down 200 points.

This is an impor­tant aspect of the Elephant’s Paycheck Blueprint. By focus­ing on the right met­ric, we stay steady and moti­vated. Confident in our pro­gress towards our finan­cial goals, we will stick to the plan with­out get­ting spooked by a short term drop in the stock mar­ket.

There is no reverse law of gravity that applies to a drop in the stock marketUps and downs of the mar­ket are tran­sient. There is risk. As I like to tell peo­ple, there’s no law of reverse grav­ity in the mar­ket. If some­thing goes down, it may not come back.

However, remem­ber that our invest­ments are (should be!) mainly div­i­dend aris­to­crats. Dividend aris­to­crats have a 25+ year his­tory of rais­ing their div­i­dends. That doesn’t mean it will con­tinue into the future always and forever. It does, how­ever, mean that some­thing would would have to be mate­ri­ally wrong for that pat­tern to change. And, that wrong-ness is some­thing we, as indi­vid­ual investors invest­ing in align­ment with our social val­ues and per­sonal inter­ests can pick up on (in my opin­ion, some­times bet­ter than pro­fes­sional ana­lysts).

When a large drop in the stock mar­ket occurs, I like to reas­sure myself that my next div­i­dend rein­vest­ments will give my Elephant a larger raise than expected1. Remember, the raises are a gift that keeps on giv­ing, and you’ll ben­e­fit from this tem­po­rary drop for a long time to come.

  1. Because the rein­vested div­i­dend buys more shares when the share price is lower. More shares equals a larger div­i­dend increase for all future div­i­dends. 

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