My Investing Mandate Moving Through Market Volatility

 Let’s address the elephant in the room: My portfolio is currently down about 8% from its all-time highs.

Watching a sea of red when we open our brokerage apps can be nerve-wracking. After all, we believe in compounding wealth through time in the market, but it seems like a sizable portion of our wealth is being eroded away right in front of our eyes. 

But when the market gets chaotic, I also know how damaging it can be to panic-sell, and how futile it can be to try to time the market bottom. 

I don't hold much cash in reserve now, and in the current market condition it does seem like I am out of good moves to make. The next best move then, would be for me to do nothing and stick to my own Investing Mandate. 

My mandate is incredibly simple: Dollar-Cost Average (DCA) monthly, and reinvest every single dividend. My mandate does not include trading, holding cash and trying to time market crashes. This two-step mandate is simple but a powerful mechanism for me to stay fully vested, to keep on compounding my portfolio and dividends cash flow. 

The DCA Auto-Stabiliser

I commit to deploying a fixed amount of cash every month into my portfolio, for the purpose of adding more shares to my holdings. This will happen regardless of the market condition. Mathematically, this also guarantees that we buy more shares whenever prices come down lower.

Just a few weeks ago, our portfolio was at all time highs and many of our holdings were at historical all-time-high prices. While our portfolio has dropped 8%, it also means that our monthly DCA has gained 8% purchasing power in accumulating income-producing assets.

The Dividends Snowball

In a bear market, dividends become a wealth building supercharger. 

The months of March, April and May are cashflow-heavy months with many rounds of dividend payments from the companies in my portfolio. Stock prices have dropped, but the dividends per share previously declared will remain entirely the same. This would then mean that my dividends can 
purchase more shares at a cheaper price.

In the months to come, these new shares purchased will pay their own dividends too. Our portfolio can quite literally eat the market volatility and become fatter over time.

Defeating Decision Fatigue

Emotional decision making can be a real wealth destroyer. Without my investing mandate, I might wake up every morning asking myself some impossible questions: "Should I sell? Should I hold cash? Is the bottom in? Should I wait for a 10% drop or a 15% drop?"

I admit that strictly following an investment strategy is not easy, and everyone needs to get past that hurdle to stomach market volatility and stay the course. 

A strict mandate eliminates decision fatigue. You don't have to predict the future. When the first of the month arrives, new cash is deployed. When dividends hit the account, it is reinvested. We outsource the heavy lifting to the mechanics of our investing system. 

Conclusion

Overall as dividend investors, we track our wealth by the number of shares we own and the cash flow those shares produce, not by the daily fluctuating price tag the market slaps on our portfolio.

If the market goes up, our net worth hits new all-time highs, and we can all shout and celebrate.

If the market goes down, our monthly DCA and reinvested dividends buy more shares for cheap.

It is very much a "Heads I win, Tails I win" scenario. So, let's not worry too much about markets showing red and let our investments continue to work hard for ourselves. Huat La !!