Dec 302012

UntitledIn 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.

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 Posted by on December 30, 2012

  6 Responses to “Fiscal Cliff? I’m Glad I Have A Safety Net”

  1. Arrgghh! Too soon! I’ll be making my first investment in November of 2013 – can we delay the Fiscal Cliff so I can get in on the deals too?

    • Well Kevin this is just one potential dip in the market for 2013, I’m sure there will be some other financial fiasco later in the year to get in on ;)

  2. Hah, I like the snow flakes :0) That debt number is almost too big to comprehend. The US is basically at 100% debt to GDP level now. Luckily we’re not even at 50% up here in Canada. If our stock market drops next week I will use my TFSA contribution room, if only the US market drops I will use the money in my RRSP to buy some US equities.

    • It went up so many million during the time I wrote the post that I could hardly believe it! I’m thinking of adding KO to my portfolio in my RRSP, but most Canadian stocks are priced really high right now.

  3. The fiscal cliff is way over hyped.
    What the markets did on the 31st is what i predict we will see for January. up.
    The news that an agreement has been reached in the states should help that prediction.

    • When they announce that taxes will go up without any spending cuts, then the problem will only continue…almost like the problem with the EU over seas.

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