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Do Not Become a Victim of Fear in Your Dividend Investing

A recent example underscores how investors may panic for no reason

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I never pay attention to opinions of random people either offline or on the internet, because I can never check their credibility, bias, motives etc. I do not pay attention to stock price fluctuations, as I have mentioned multiple times on my site, except as a way to search for underloved and undervalued securities. The only way to stick to your guns through thick and thin is to spend time doing research yourself, and keep an open mind in order to learn about investments all the time.

If the Barron’s article was the first time I had heard that Kinder Morgan Inc obtains incremental distributable cash flow exceeding certain targets from Kinder Morgan Partners, then that research was not very good in the first place. One should not be investing if they do not have a systematic way of analyzing securities. One has to start slow, and educate themselves while putting small amounts of money to work initially. It takes time, effort and patience to accumulate the necessary knowledge to make yourself a successful investor. But if you dedicate some time every week to it, you increase your chances of success, while reducing risks of total failure.

I have seen certain groups taking short positions against certain companies, and trying to produce panic, in order to profit from these events. I have seen this with Digital Realty Trust (DLR) in 2013, where those so called “smart hedge fund money” had used circular logic to confuse investors.

Examples include their manipulation of terms such as maintenance expenses with maintenance capex. I refuted those points and others in an earlier post. Again, when investors had not done a good job in thoroughly analyzing a company, they get scared away from random noise from parties that might have questionable motives.

It is interesting that on paper, everyone is a contrarian and wants to buy cheap and sell dear. In reality, when things are really difficult, everyone starts crying out loud and looks for the exits. In reality, these are the rare opportunities to step in and capitalize on the fears of the amateurs. Not all of your bets will work out, but over a long investing career, chances are that the shrewd investor will come out ahead.

I have seen this with my investment in Target (TGT) this year, which has touched a nerve with a lot of investors out there. It is a common mistake to take some small missteps that a company has achieved and blow them out of proportion. I know that Target will be out there in 20 years, which is why current valuations make sense for my portfolio. If the stock goes further down in 2014, I would keep dollar cost averaging my way into it.

Full Disclosure: Long KMR, KMI,DLR, TGT

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