Stock Trading - Entry 42

Ok, so we have all heard the phrase 'vote with your dollars' and for micro-investors such as myself, that means a whole lot is out of my hands when it comes to building a stock portfolio that is actually in the black. I can say whatever I want about picking, but in the end, I have nothing to do with aligning the stars so I can make money from stock trading. I mean, I don't sway hundreds of thousands of customers to buy this product or service as opposed to that one. Neither can I (currently) afford to buy millions of shares in a company so as to directly influence internal operations and development. I don't (currently) have money to burn by propping up an enterprise that has terrible cashflow in spite of them having products or services that can make a positive difference in the world. All of this then begs the question:

What am I doing?

Well, there are too many reasons to list why people buy and sell shares in companies. Unexpected expenses in life, reallocation within one's stock portfolio, cashing in on stock options, influencing stock prices, and saving up for retirement (which is my aim) all make it on that list. Pause.

With all those reasons, I do not see stock trading as a zero-sum game. Sure, anyone can argue that every company eventually closes its doors. Now whether it was bought out or not, there are still many ways to skin a cat (in other words, all parties involved can still make money at the end as well (see Imperial Ginseng in entry 15)). Anyway....

My reason for investing hasn't changed in the past year-and-a-half: build wealth to rely on in retirement (and, if I am lucky, retire early). That said, there are the two types of shares that I buy to consider, those paying dividends and those that don't - and each warrants a word.

Why I buy dividend-paying stocks and what that means to me

These are great for a few reasons. One, companies paying reliable dividends typically have reliable cashflows/revenues. Not always, so I always look under the hood. Some are super-stable that pay very low dividends - like, below the rate of inflation low (e.g. Pollard Banknote (PBL)). That means having money parked there is for a reason other than buying low and selling high or parking your money to beat inflation. Keeping the price high guarantees a wealthy sale, which strikes me as a signal regarding ownership concentration or change. Then there is keeping the price low with some variance, which I consider an interesting way to pay staff by way of stock options. (I have found that lots of cheap R&D stocks do this.) There are other examples and contexts, so I always check. (Notice a recurring theme? Always check.)

Two, the dividends count as extra money put towards my investment contributions - and I look forward to the day when I earn more than $360 per month in total dividends. Will I buy a stock in a company I am already invested in right when the dividend is paid out? Most likely not, especially if the stock price is fairly high. I mean a five-cent monthly dividend for a $1 stock price versus a $12 stock price makes a difference whether I earn 5% per month on my money versus 5% per year (assuming no additional or fractional shares are bought). As a result, setting up an automatic DRIP would be unnecessarily blind on my part - although it would automate things.

Three, the dividends basically amount to me buying more stocks for free. This means I can get free money by investing my money in companies that want to attract investors to invest in them. In short, this reinforces everything within my sell-out lines. But that means a given company needs to keep doing its thing and for customers to buy their offerings. I have no control over those things, but they happen anyway.

Technically, buying stocks without using my own investment contributions (e.g. from employment income) mathematically equates to an infinite ROI, but that perspective ignores maximizing its impact. For example: If company A has a lower-than-usual stock price this month and is still doing well whereas company B has a relatively high stock price, then I will use company B's dividend to buy shares in company A. Likewise, if company B's stock price dips and they are still kicking butt at what they do while company A's price is high, then I will use company A's dividend to buy shares in company B.

Four, I can still buy those stocks low and sell them at a higher price - assuming the stars align. For that, I will dive into the other types of stocks I buy.

Why I buy stocks that don't pay dividends and what that means to me

Historical slumps in stock prices have taught me that perfectly fine companies (in terms of management, operations, and development) with a reliable customer base are still subject to investor sentiment - which is the direct driver of stock prices. That's a pill to swallow since the bulk of the money I have made stock trading as of the date of publishing this article has basically been due to investor sentiment (and three buyouts).

That said, investor sentiment can be somewhat logical. A company takes on too much debt, sharp downturns in revenues/sales, shaky management...are all logical connections between stock price and investor sentiment. My impact in this regard as a micro-investor is negligible.

That said, there are also illogical aspects of investor sentiment. Examples include wanting to buy a car and those are the only shares you have to sell, belief the world will end (see entry 7 to read why I had no qualms buying during the dip in April 2025), following blatantly unprofitable trends, and reading tea leaves. None of these illustrate a connection between company performance or customer markets relative to the stock price. My impact in this regard as a micro-investor is also negligible.

A different approach to buying stocks

If I wanted to invest in the stock market and actually have control, a whole lot more money would need to be involved. Being a micro-investor, that leaves me with very few options. In fact, the only one I can think of are funds, be they exchange-traded funds (ETFs) or mutual funds. Those have lots of money available to invest in whatever someone else selects. This, however, begs the immediate question of how that someone else makes their selection.

Do they select me? As a micro-investor, that typically depends on whether or not I meet the minimum buy-in requirement. What companies do they invest in with the fund? I took a look at some funds and none match my decisions, although a very few come close, actually. Still, a comparison is eventually warranted.

Do I want to become a fund manager or seller? At this point, while I am not sure, I am not so sure I would want to be forced to tow a line I wouldn't or didn't choose. That's why fancy titles or letterhead don't immediately attract me.

What I could replace all this with

With any amount of inflation, leaving my money tucked under my mattress means I end up with less as time goes on. That means I have to do something with it, especially since I want to build some wealth. If not stocks, then it would have to be something else - but that is not what I have chosen (aside from dabbling in blockchains).

What I have to say when all is said and done regarding low control

Canada has a distinct market and stock trading environment than other countries, including the USA. It's stable, reliable, regulated and familiar (since Canada is my home and I participate in the market anyway). But I am stuck with not having an ego because any stock trade I make is subject to everything I just wrote about, which are things over which I have no control. That means any time I sell my shares in a company, it has little to do with me - and this has been the case so far.

That said, results are interesting. In 2024, I obtained 15% ROI. With the market dip in spring 2025, my obtained ROI so far in 2025 has been well over 20% - and it would be a lot higher if it weren't for a few laggards. (Neither of those figures factor in blockchain investments.) Point is, I cannot take credit for that performance. How could I have known about the three buyouts that have impacted my portfolio to-date? Without being directly involved, I couldn't.

As far as continuing to invest is concerned, people are going to continue to do great work in their chosen field and so long as that backbone isn't broken, I subscribe to a generally positive market outlook. So, I will keep trucking along. (It helps I also find learning about various markets and industries interesting.)

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