How To Manage Expectations when Investing in Stocks

Managing expectations is likely the equivalent to managing stress when it comes to investing in stocks. The best piece of advice in managing your expectations is to not have any expectations to begin with. But, we are all of course human, and you probably wouldn't invest in a stock if you expected it to do poorly. So, we are all going to have at least some expectation of a positive return or ROI (Return on Investment) when it comes to investing.

Keep in mind that listening to experts might not always be your best option. Imagine wanting to own a specific company because you like what they make or the services they offer, then invest based on research you personally do on that particular company. A big corporation that comes to mind is Disney (DIS), they make a lot of movies you may enjoy and even sell merchandise and have theme parks. Not a bad choice, but as you investigate them further you will discover they pay only a meager $.35 per share per year, currently that is only about 1% APR. Now days you can earn that through a passbook savings account.

graph jason skepyan Anyway, what about the anticipation of earnings that weren't exactly what you though they were going to be. Some experiences you might have with this is if you decide to invest in an ADR (American Depository Receipt), which is a foreign stock that is traded just like stocks in the US exchanges. These sometimes show promising signs of huge dividends, but take the company Formula Systems (1985) Ltd (FORTY) for example; this is an Israel based company that deals in business software which paid a dividend of $4.02 a share back in 2005. At the time that was a whopping 20% APR, but that was the last time they paid such a high dividend and their most recent dividend was only $1.47 a share at only 12% APR. So, you may have bought into this company expecting 22% and only received 12%, still not the worst profit, but when you are expecting almost twice the amount of return then it becomes very frustrating.

According to, some people like to try diversifying to aid in diffusing this expectation stress, but when they try to do this on their own it can cause even more problems with expectations and you may want to get professional help from a no fee investment advisor. The reason you want an advisor like this is they usually operate independently of any major chain of advisors like Morgan Stanley, Charles Schwab, or Edward Jones just to name a few. So their interests are much more involved on your total bottom line return rather than how much money you have available to invest, which is a reason many private investors get turned away and frustrated.

Anyway, when you find this professional help you can begin diversifying immediately regardless of small amounts of money you may have to spare. And personally, I can't imagine them steering you away from Closed-Ended funds or even REITS (Real Estate Investment Trusts) as they are typically the two highest yielding securities that can be found on the planet. Almost all these types of securities pay a two digit APR return, and there are a few closed-ended funds available that pay dividends every month, making them more lucrative to someone wanting to develop a monthly income. Now this may not completely eliminate the stress of your expectations, but it will provide some relief when you find solid dividend histories attached. One example is the relatively new REIT, American Capital Agency (AGNC), which has been consistently paying 18-19% dividends since 2007. I know it's not long, but there hasn't been any interruption in dividends from this company and it is currently at 19.45% APR.

big footer image investing jason skepyan