In case you’ve been out of the loop for the last 20 years, the United States is in a little bit of a financial pickle; to the tune of $16,414,315,005,000 as I write this line. It took the U.S government this long to realize there was a problem and NOW they’ve decided to actually do something about it. A decision must be made by Monday, Dec 31 as to what’s going to be cut from the budget and who is going to pay for the giant debt; every tax-payer or only the really rich ones.
I’m no scientist, but my money is on everyone having to pay up. Even if the ultra-rich end up footing the bill, I’m pretty sure the cost will be passed on to the general public through increased prices and fees. Either way, the entire world is going to be affected by the aftermath of the whole situation. Already the markets have taken a hit from just the news of the deadline, so who knows what will happen in the weeks to come.
What would Benjamin Graham do?
If enough investors panic and the markets do take a tumble in the new year, it could lead to a potential buying period. I’ll never forget Benjamin Graham’s wise words to “buy when everyone is selling” and that’s what I intend to do. It will be just in time for my annual contribution to my TFSA self-directed trading account. Now thanks to the TFSA limit increase, I’ll be able to buy even more stocks that drop in price.
Everyone needs a safety net
Even though my portfolio will decrease in value if the markets take a dive, I won’t worry one bit because I’m in this for the long run. I’ll still be making an average of over 5% from the dividends that are deposited into my account. As the stock price decreases, the dividend yield will be increasing, which will entice investors to buy in. That’s how dividends act as a safety net to cushion the blow of market volatility.
Most investors are unhappy when the markets dip. I on the other hand get excited because it means a good opportunity to buy in. After all, no one likes paying full price when they make a purchase. I’ve been saving my dividends for most of 2012 waiting for an opportune time to buy more blue chip dividends stocks. I guess we’ll see what happens in the next few weeks as to which way the markets will go.