Each week you'll learn how to be a better dividend investor and follow the journey of a welder with a passion for passive income to $1,000,000 and beyond.
Readers of this newsletter know we bought a car on October 7th, 2024, and plan to sell off our positions in PepsiCo (PEP) and Johnson and Johnson (JNJ) to pay for it in full.
We shared lessons learned in that newsletter, but the biggest and most painful lesson came this week.
There's prevailing wisdom that any money you know you will need to use within the next two years should be kept from the stock market.
The idea is that just before you need to use it, there could be a black swan event or a significant market drop, and you'll need to sell your investments at a discount or, even worse, at a loss.
We bought our car on October 7th, and I had been waiting to sell those stocks until we received our first loan payment notice, which came last weekend.
Below is our balance; we will pay about $202 interest on the first payment.
On Thursday, Drug company and major food corporation stocks dropped significantly after President-elect Trump announced Robert F. Kennedy Jr. as his pick to lead the Department of Health and Human Services, mainly due to Kennedy's history of vaccine skepticism and his stated plans to reform both pharmaceutical industry practices and food additive regulations.
Jim Cramer thinks differently, which could spell DOOM for these stocks! 😅 Check out his take here.
We won't get into the politics of this, but we know that there is now new uncertainty surrounding pharmaceutical and major food corporation stocks—and the market hates uncertainty!
Had we sold off our full positions when we decided we needed a new family car in early May 2024 and moved that cash into the Schwab Value Advantage Money Fund (SWVXX), the total return would be as follows:
That stings. Mostly because I was greedy and thought the worst case was PepsiCo and Johnson & Johnson would be flat, and I'd receive a few rounds of dividends, too.
Now check out what would have happened had I liquidated the full PEP & JNJ positions the day we bought that car-
To put it bluntly, I was stupid for not selling immediately when we KNEW we would need the money within two years, and we could have had a few thousand bucks more in cash, earning a +4% yield along the way.
PepsiCo (PEP) is hovering around a two-year low, and Johnson & Johnson (JNJ) is over 7% off its recent high in late October 2024.
The sell-off could be an overreaction, but the market reacts to uncertainty, and until the market receives clarity, I fear these stocks will chop sideways at best.
We'll take it day by day, and at least these two stocks will go ex-dividend (the day we must own shares by to qualify for the next payment) soon, and we'll receive $275.62 in dividends:
11/26 Johnson & Johnson (JNJ), $1.24/share = $140.12
But if the stock prices keep falling, this will be a pyrrhic victory and yet another lesson learned on our investing journey.
What started as a simple car purchase turned into an expensive lesson about market timing. When you know you'll need cash within two years, park it in a money market fund earning 4%+ or a high-yield savings account rather than gambling with stocks - no matter how "stable" those companies seem.
Sure, you might miss some gains and dividends, but you'll protect yourself from exactly the kind of unexpected market events we just experienced. Sometimes, being boring with your short-term money is the smartest move you can make.
P.S. I have been using AI to tighten my writing and improve the flow, but that was not the case in this one. I would love to hear your thoughts on whether you enjoyed it the same or if you would like a shorter or broken-apart-by-subheading format.
😁THANK YOU to everyone who responded to the last newsletter!!
In their Q424 stock pick, Clay and Kyle spotlight Mastercard (MA). Everything you wanted to know but were afraid to ask. I enjoyed this in-depth look at a company we're familiar with but might need help understanding the nuts and bolts of its operation.
🎦In case you missed it, a FIRST-EVER interview with seekingalpha.com author "The Dividend Collectuh!"
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Each week you'll learn how to be a better dividend investor and follow the journey of a welder with a passion for passive income to $1,000,000 and beyond.
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