The end of February 2020 saw a dip in stock market prices. This came on the heels of a 10 year long bull market. For the last few months we’ve watched as many companies hit new 52 week highs. According to Market Watch, the Dow Jones Industrial Average fell 12.4%, the S&P 500 lost 11.5%, and the Nasdaq was down 10.5%. Some gains were made on Monday, March 3 as the market attempted to stabilize. Then, on Tuesday, March 3 we had the Federal Reserve announce an interest rate cut of a half percentage point, which led to further action in the market.
I wanted to share what I was doing in the final week of February as prices were dropping. This was all according to the plans I have been making for my portfolio in case of a downturn and with hindsight, I surely acted too early on some of my purchases. What I am going to go over now is not financial advice for you. We continue to face volatility in the market as various news events unfold across the world. You should take into consideration your personal situation, risk tolerance, and financial goals, as well as completing your own research, before making or selling any investments.
Before we get into what actions I took, I wanted to share something that I heard on the Afford Anything podcast hosted by Paula Pant. She was interviewing David Stein, the former Chief Investment Strategist and Chief Portfolio Strategist at Fund Evaluation Group. He wrote a book titled, Money For the Rest of Us and the podcast covered 10 questions to master successful investing. I wanted to highlight a statement he made in the middle of the interview, that I found really freeing when it comes to investing.
It was such a simple statement to dismiss the perfect portfolio, but it felt profound to me. It gave me permission to reduce my anxiety about my investing choices. It allowed me to feel comfortable knowing that I’m not going to be able to chase down the very best price on an investment. That I am not going to be able to optimally invest every dollar in an attempt to design an elusive perfect portfolio. I know my portfolio isn’t even right for me now as I am trying to fix some of the issues I have with it after I had investments made that I wouldn’t have necessarily chosen myself, on the advice of a financial advisor, who I no longer use. I am slowly working to rectify those investments. But even once I have done that, by nature, my portfolio just is not going to be perfect. Knowing that relieves some of the self-inflicted pressure to try to make it that way. I hope sharing this idea will help some of you too. If you are interested in listening to that podcast or reading through the show notes, which contains so much valuable information on investing, you can find them on the Afford Anything website for episode 240.
Reflecting on that last week of February 2020, most of the investment transactions took place in my IRA at TD Ameritrade. There were a few reasons that I had some cash in this account. I had deposited my allotted $6,000 contribution for 2020 into the account, but hadn’t yet invested it. I had also built up some cash over the year from some dividends that I decided to not have automatically reinvested, mostly from companies that I don’t plan to keep long term.
Cash was also in the account from selling stock. At the beginning of January, I had sold shares that were invested in Facebook (FB). This was one of the investments made when I was using a financial advisor. I didn’t want to remain invested in the company for a few different reasons, based on some wider moral and ethical objections, but also including their handling of a personal issue that soured me to the platform. I committed to selling my 64 shares after the share price rose over $210.
Once that happened, I set up a few different limit orders in my IRA to redistribute the money to dividend ETFs that I wanted to buy. I was anticipating that there might be a slight dip in the market at some point in February following the enthusiasm we were seeing in the market in December and January and having heard of the January Effect. I set up my limit orders to be just a few dollars below the prices that the ETFs I wanted to invest in were trading at. Keep in mind that when I was setting up these orders, I was only taking into consideration a potential drop in investor enthusiasm, NOT a developing global pandemic.
Then on Monday, February 24, my first limit order went through for the FlexShares International Quality Dividend Index Fund (IQDF) at the price of $22.87 per share. On Wednesday the 26th, a few more limit orders went through in the account, including for my favorite dividend ETF, which is the SPDR Portfolio S&P 500 High Dividend ETF (SPYD). I bought SPYD in two batches, one at $36.60 and one at $36.20 per share. I also added to my position in the SPDR Russell 1000 Yield Focus ETF (ONEY) at $68.30 per share. I opened a new position in my IRA in the iShares Core High Dividend ETF (HDV) at $90.15 and as I watched the price drop lower that day, I set up another limit order on it at a lower price, which ended up being filled on Friday, February 28th for $82.40 per share.
On Thursday of that week, I added to my positions in three more ETFs: these were the Legg Mason International Low Volatility High Dividend ETF (LVHI) which I bought at $25.61 per share, the Schwab U.S. Large-Cap Value ETF (SCHV) that I bought at $55.22 per share, and the Vanguard High Dividend Yield ETF (VYM) at $86.10 per share.
I had been wanting to add more shares of the Fidelity MSCI Real Estate Index ETF (FREL) to my portfolio, but for many months the price was higher than I wanted to pay. My limit order was finally triggered on Friday the 28th and I was able to buy in at $26.21 per share. With the last of the cash in my account, I decided to buy more IQDF, since it was now even lower than I had bought it for on Monday. I chose to add more into this particular ETF because I don’t have a lot of International investments in my IRA and this one’s dividend yield was up at 5%. I bought it for $21.41 per share. I invested all of the cash that was sitting in this account. At the time, I figured it was better to get it all going to work for me right away and I didn’t want to worry about what I was going to do with it anymore.
Do I feel bad about not getting the lowest prices on these purchases? Definitely, I feel it! But most of these ETFs I managed to buy in the middle of the range of what they had cost the week before and the lowest that they hit that last week of February. Given that these investments are in my IRA and I won’t even be accessing this money for another 20 years, I have to be okay with this and I’m just glad I didn’t pay for these ETFs at their very highest prices. Meanwhile, I am looking forward to earning dividends in the next few months that will be automatically reinvested, and then hopefully I will be able to take advantage of some lower prices that way.
After all of these purchases, the overall value of my IRA at the end of the first week of March was down just 1%. It’s value is being held up by large investments I have in Comcast (CMCSA) with an overall gain of 28% since my initial investment and AT&T (T) with a gain of 24%. Also, I have a smaller position in the Schwab US Large-Cap Growth ETF (ticker SCHG) which is showing a gain of 39%. I do have other investments in the IRA, but I’m keeping some of that information private. I am merely sharing here my actions during that market correction.
You might wonder how my dividend-focused TD Ameritrade Trust account was doing that I’ve written about on this blog. Last week, I added to my positions in HDV and the Walt Disney Company (DIS). I picked up both of these on Wednesday and ultimately, not at the very good prices, but I added just 5 shares of HDV at $90.25 and 10 shares of Disney at $126.70.
I had noticed the price of Disney shares starting to come down , because I had already had a limit order to add 10 shares of Disney to the custodial account for my older son. That order went through at $128.20 on Tuesday, February 25. The price kept dropping with the rest of the market, as well as the news that Disney’s CEO Bob Iger was stepping down from that position and assuming the role of Executive Chairman in order to direct the creative side of the business. Bob Chapek was named as the CEO. I believe this announcement led to a greater drop in Disney shares than what might have otherwise occurred that quickly. I later added another limit order to my son’s account for 5 more shares, which went through at the price of $118.20. I also added more SPYD into his account, buying in two batches at the prices of $36.25 and $34.70. I ordered the same prices on SPYD for my younger son’s account. He got the best price on the batch of Disney shares I was buying as I added 10 shares into his account at the price of $114.82. Both of my sons had some money in their accounts waiting for investment, because they each had a handful of Facebook shares that I had sold off too.
I didn’t have as much money to work with in my personal E*Trade brokerage account as did in my IRA, but during the last week of Februay I did add a few shares to some of my positions when I saw the prices dropping below my original purchase prices. These were: the Global X Super Dividend U.S. ETF (DIV) which I bought at $21.52, the iShares Core S&P Small-Cap ETF (IJR) bought at $75.20, Vanguard International High Dividend Yield ETF (VYMI) bought at $57.92 and the Vanguard FTSE Developed Markets ETF (VEA) at a price of $39.95 per share. I only added to one individual company in this account, Pfizer (ticker PFE), buying those shares at $34.20. Again, I have many different investments in this account, which I am also keeping private. I still have $2,000 in cash in E*Trade that I am waiting to invest or possibly may hold for a while in case of emergency.
While I am glad that I could buy in on some investments I had been holding back on adding to, I know I didn’t get the best prices. I was eager to get my money working for me and didn’t set my limit orders low enough for such a drastic drop. I am also disappointed that the bull market didn’t run another week or two. I was very close to the selling prices I had set on some of the other investments I wanted to remove from my portfolio. Now, I am left holding them for a much longer term than I anticipated as it looks like prices will not return to their previous levels any time soon. Either that or I may sacrifice a few of those companies to take advantage of tax loss harvesting up to the $3,000 level for the year 2020. Even if I eventually decide to go that route, it is likely that I will hold for a few months before committing to that option.
Disclosure: Information shared on Squintillions is based on the author’s own experiences, thought processes, and research and is not intended as professional advice. Please do your own research before committing to any investment! If you feel your personal challenges are beyond the scope of my suggestions or other self-help materials, please seek professional counseling.Further, there are some affiliate links and ads used in this website. If you purchase an item when following these links, I may receive a commission on your purchase.