There are many ways what you can do when market is falling. You could probably find advice on selling your positions and go sideways, buying more stocks, do nothing etc. Well it is all about strategy.

I remember myself when I was trying to figure out which way to go. Originally I used a strategy of selling stocks which hit my stop loss. Unfortunately during markets like today I was stopped out quite quickly. I ended up collecting losses. One after second.

I was thinking what I can do to prevent it. What strategy would be the best? Which would work for me?

Well, it is all about strategy.

With a small account like mine I couldn’t afford swing trading or timing the market. Although I still believe in this strategy as good one and I still believe that it is possible to time the market. But timing the market will increase trading frequency and also you may pick up more wrong stocks or wrong timing. With a small account you cannot afford it. That was my lesson.

So I must hold stocks longer. I must pick and buy stocks, which won’t be that volatile and which will hold value better than small caps. Besides some other reasons, this one was the one why I chose dividend paying stocks.

But what to do when the stock market is falling and almost all your holdings go south? First don’t be panicking. Mr. Market is once again having bad mood and overreacting. Based on the strategy he is actually creating a great opportunity for buying.

For me it is an opportunity. As I mentioned in my previous post I try to teach myself to stay calm, when the market is growing and get ready when it is falling. Watch your investments and save money. You may reinvest dividends or invest new savings into slowly growing stocks during long term strong bull trend, but during volatile market like today I am just saving and sitting tight. Now when the market is in correction I am preparing to act. I was waiting for Kinder Morgan stock as I said in my previous post, but I have bought CTL instead. CTL showed better results to me, better dividend yield, growth and other numbers I look at. Now, after I purchased CTL I am again waiting for KMP.

When I first mentioned KMP it was trading at $75.84. Today, a few days later KMP closed at $72.09. Given the size of the company, industry it operates, services it provides and dividends it pays this stock doesn’t look as a bad investment to me. Buying it cheaper is a great opportunity.

When the market or the stock shows strength again I will buy and add this stock to my portfolio. If the market continues growing, I will be saving money again for another buy opportunity.

How do you invest or what you typically do when the market is growing or falling?

In my few posts I wrote that I was looking for new opportunities to make some extra cash which I will have available for investing. Almost every week I search the Internet to find those opportunities.

It is not easy, because the net is full of scam today. Many times I come across a web which claims that you can make thousands of dollars a day. Yeah. If it was that easy, everybody would be a millionaire already.

So the first rule is, if it looks to be too good to be true, it probably is a scam. So I am not interested.

The second rule is that if any of the promoters promises you to reveal a secret way how to make dollars IF you pay only $xxx fee, sorry, I am not interested either. I am looking for making some cash, not pay cash to somebody.

There are some ways how you can make cash.

• You can start your own business (I am currently so busy at my job, that this option is not for me – yet).
• You can take part time job (I already did it, but had to quit. I could sleep only 4 hours a day between two jobs, so not for me).
• Affiliate programs (this can be a great source of additional income, but I wasn’t successful so far. I will be trying, however).
• Investing (I think, after circa five years of learning I finally got the idea how to invest successfully).
• Stock, options & penny stocks trading (Here I still need improvement and learning, so not doing it yet).
• Alternative sources (see below).

I do not know how to call alternative sources using different name. I came up with some which makes me money.

Lending Club

I wrote about this site many times. I am currently making 12.27% (annual rate). Everybody can do it and with a little effort the account can be self-working. And that is exactly what I wanted. I am a lazy person, so something what can work for me is good for me. Everyday I just glance thru the account to see how it is doing and move forward. It is growing and making me money. I have a plan that as soon as the account reaches a certain level, I start pulling some cash out and reinvest in my other “Trading” account.

If you want to give it a try, click on this link or banner.

If you open an account and invest, Lending Club gives you $25 dollars welcome cash. And that is all you need to start. If you invest more, you will be eligible for more money from Lending Club.

Hits4Pay

This program requires a little effort. It is a program where you get paid for reading emails. It doesn’t pay big money, but better small than nothing. You have two options how you can make some cash:

1. Reading emails and make circa 0.05 cents per email (so you won’t get rich quickly – did I disappoint you?)
2. Recruiting new members – referrals. (I do not have much experience with this, but I give it a try.)

When I started my account some time ago I received $10 welcome bonus. Nice to start. Then you need to do some work. If you wish to give it a try, click on this link or banner below.

Among many other websites, Hits4Pay looks the most reasonable to me. If you wish to give it a try, click on the banner above. You get $10 sign-up bonus which is good to start with. They pay every time you reach $25 dollars on your account.

YouData.com

I came across this web site recently. When you sign up, you need to fill up a questionnaire based on which you start receiving ads. They call it “MeFile”. I must admit that I liked those ads so far. They definitely were in a range of my interest. They also pay nice rate per ad and they pay to your Paypal account. There is no minimum, so you will be receiving even small cash.

All other websites I visited were either scam or worthless. However, I do not say that there are no other, better programs. I might not have visited them yet. So if you know about any other, which provides reasonable payout, let me know. I will definitely give ’em try.

I have read this little rhythm somewhere and I liked it. Some professionals from Wall Street and analysts say that May is typically a weak month when stocks fall. If I recall it correctly, last year it was actually April when stocks headed south. But I may be wrong.

Sometimes it is confusing listening to advice like this. We are bombarded by information like this every time and newbies can be quite confused. Once, I remember, I wanted to make a list of weak and strong months and coordinate my buying accordingly. Glad I didn’t have enough time to do so.

As I have changed my investing strategy I see this weak month as an opportunity. If it shows up as they say and stocks will head down I will be actually happy about it. Even though I will see a lot of my holdings in red numbers (which is psychologically very hard for me) I am repeating to myself, that this would be a great opportunity to buy. Even if the stocks head down, it won’t last forever and I can be buying cheaper than today.

So what I am doing during the period when stocks are growing? Waiting and saving. I save money to have enough to buy when the stocks fall so I can buy more. And when stocks start growing again I will sit, wait and save money. If I have saved more than a few dollars I am willing to invest into my mutual fund HSTIX, which I can be buying without commissions and it pays dividends. This fund serves me as a money storage. As soon as I see a buying opportunity I sell a portion of my holdings in the fund and use released money to buy.

Right now I am waiting for Kinder Morgan as my next buy. It yields 5.8%, its 5-year average dividend growth is 7.13% and it was increasing the dividend in 14 consecutive years. I want the price drop down, so I can buy cheaper.

You may have noticed that on the right sidebar I have a list of stocks of my interest. These are the stocks I am planning to add into my portfolio.

The list contains primarily dividend paying stocks, but time to time I add a speculative stock into the list. For example right now it is Old Dominion Freight Line, which showed momentum and rapid growth in price. If this strength continues I may add this stock into my portfolio.

In my Trading account, as I call it, I would allow circa 30% of the portfolio for more risky trades but the rest will be strictly dividend investing. Those 30% will be dedicated not only for speculative and growth stocks, but for option trading as well.

Right now I am preparing for options trading and studying and maybe later I will try one small trade with real money to see how it all works.

As far as today I am still in accumulation phase, however. I am satisfied with my results. Within a year I was able to save and invest 10k in my Roth IRA account and raise my savings in Trading account up to $4000. I am using margin to buy more dividend stocks, so I purchased stocks for $10,000.

I have read an article about leveraging an account with margin by buying stock “ahead” and then paying down the balance over time. The book Lifecycle Investing: A New, Safe, and Audacious Way to Improve the Performance of Your Retirement Portfolio by Ian Ayres, Barry Nalebuff, which writes about this strategy created a lot of controversy and negative feedback from investors as far as I could read on the Internet.

However I like the idea. It helps me to boost my investments. I believe that in combination with dividend investing I can purchase more stocks now, collect dividends and enjoy stocks appreciation. OK, I understand that margin is not for free. Currently I pay 9% for the loan from my broker. It is acceptable for me and as for now I am paying this loan down. I invested my own 3000 dollars and borrowed $7000. My monthly payment is 57 dollars. For me – manageable and acceptable. So I decided to give it a try and see if this strategy works for me.

Back to my watchlist. I added a page with watchlist in the sidebar, where you can see more details why I selected those stocks. It is not a rocket science and many dividend investors will recommend most of the stocks in the list.

What I am looking at when selecting the stock? As far as today I want to be investing aggressively, thus I am selecting stocks which pay higher dividends (high dividend yield) so I can reinvest back or accumulate to buy other stocks. Now I am OK with lower dividend growth, but I watch this item closely too. I am selecting stocks with high yield as well as higher dividend growth. I want to be in the middle range of the following:

• stocks with high yield and low dividend growth
• stocks with higher yield and higher dividend growth
• stocks with low yield and high dividend growth

Now I am buying primarily stocks from the second category as well as stocks from the first category. I am also adding riskier stocks with high yield, which do not or barely fit other criteria, such as dividend history (once it was AOD fund).

Next criteria I look at is how many years the company was increasing dividends (for example JNJ was increasing dividends for 48 consecutive years), when it started first paying the dividends and what industry and sector the company belongs to. That is not only because of my allocation, but also to see, why the company didn’t increase its dividends. For example banking and financial companies were slammed by the recession. That necessarily doesn’t mean that the company would be bad at all. For example Bank of Montreal was increasing the dividend since it started except a few moments in 2005 and obviously in 2008 – 2010 – during the crisis. I believe, banks will recover again and start paying dividends again. Thus it seems to me as a good opportunity to add some shares of this bank to my portfolio, mainly when it yields 4.2% and its growth is 8.57% (the company is in the second (middle) category as shown above.

Let’s take a look at my list of the stocks I am planning to add (it can change over time obviously) into my portfolio:

(If the table below doesn’t show up, hit reload in your browser. I do not know why sometimes it is not loading, but reloading the page helps).

View the entire spreadsheet here.

You can also find the same list on the right sidebar under Pages link.

There are plenty of benefits to owning stocks that pay their dividends monthly. According to the Excel list that was just updated by WallStreetNewsNetwork.com, there are over 200 different companies that pay dividends monthly, many of which have high yields. Technically, these stocks are real estate investment trusts, oil income trusts, closed end bond funds, and closed end income stock funds, which pay dividends every month. Advantages to receiving monthly dividends as opposed to quarterly or annual dividend stocks are that the invested capital is returned faster, compounding takes place quicker, and there is usually less price volatility of the investment. Also, many of monthly dividend investments pay dividends that are tax free.

An example is the MFS Multimarket Income Trust (MMT) which pays a yield of 7.80%. The stock trades at a 9.2% to net asset value. The company, which has been around since 1987, has a management fee of 0.82%.

Gas Natural Inc. (EGAS), formerly known as Energy, Inc., is a distributor of natural gas in Montana, Wyoming, North Carolina, and Maine. It was founded in 1909. The stock pays a yield of 4.6% and carries a price to earnings ratio of 12.7.

Baytex Energy (BTE) is an investment trust which generates income from petroleum and natural gas properties. It generates a yield of 4.2%, and has been paying monthly since 2006. The company trades at 22.4 times forward earnings.

Realty Income Corp. (O), with the great single letter stock ticker symbol, yields 5.0%. This real estate investment trust which specializes in commercial retail real estate, has been around since 1969. The stock trades at 16.7 times forward earnings.

Calamos Convertible & High Income (CHY) has a decent yield of 6.9%. However, the management fee is a bit on the high side at 1.13%. This CEF, founded in 2003, invests in high yield fixed income securities and convertible securities.

Provident Energy Trust (PVX) is a Canadian income trust which generates a yield of 6.1% through the marketing of natural gas liquids. It was founded in 1993. Canada’s new legislation which taxes trust income goes into effect this year. This would tax the trusts at the corporate level in addition to the shareholder level. However, many analysts believe that this taxation is build into the price of these Canadian trusts.

Use caution choosing these investments. Avoid the ones with high management fees, watch out for the ones with limited liquidity and which trade very few shares on a daily basis, and if you invest in the municipal bond closed end funds, make sure you know the consequences of the Alternative Minimum Tax. You also want to find the ones that trade at a discount to net asset value, and avoid the ones using excessive leverage.

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After going ex-dividend Monday, shares of American Capital Agency Corp (AGNC) were falling further after hours on news the company will be offering 27,000,000 shares of stock. Underwriters will have the possibility to sell an additional 4,050,000 shares to cover any overallotments. Investors who have held AGNC for a few quarters should have seen this coming since it is the 4th large equity offering since September. However, looking at the market response to previous offerings, investors might want to participate in this secondary.

While shareholders should never like being diluted, it makes sense for AGNC to keep issuing shares to expand its holdings of securities given that shares trade at a premium to book value, which was last reported being $24.24 on February 8th. The fact that shares continue to march higher, even with the dilution, is a testament to the strength of the company’s management American Capital (ACAS), and the 19% yield. If you purchased shares on the September offering at $26, you will have received one $1.40 dividend already, and will be due the next $1.40 dividend April 27th. That amounts to $2.80 in dividends, as well as about $2.50 in stock appreciation, depending on where the new offering prices, for a total return of $5.30, or 21.5% .

I do not expect the stock to run much above the $33-$35 range given the book value on the shares. However, the company has consistently paid the current $1.40 dividend for 7 quarters and has paid out $14.66 since its formation. The incredibly high yield makes AGNC a winner, and these equity offerings have proved to be opportunities to get shares at a discount. The weakness on the open Tuesday will be an opportunity to get a great yielding stock on a dip, and gain access to this massive dividend yield.

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