Requriement: A Stomach Like Iron (or own dividend paying stocks)

Commodity prices tanked yesterday, and reinforced once again, that this game of investing we play is a serious business and it should not be taken lightly. I can only imagine the people out there who have very little experience owning resource and commodity based stocks looking at their portfolios trying to figure out what the hell happened. In Canada, the S&P/TSX has fallen 500 points (or 4%) over the past 4 days.

There is a tone of speculation happening right now. I believe many people are trying to ride the wave and buying up companies that seem to have good momentum and Jim Cramer recommendations. Let’s face it, for a while there it seemed like everything was going up and whatever you bought would end up greener everyday. This creates a false sense of confidence in people – they think they know what they are doing.

Don’t get me wrong, I am no expert at investing. But what I have learned over the years is that it is important to diversify and not get sucked into trends that seem to be too good to be true. I own resources stocks through my employee stock purchase plan and my pension account, but I also hold Coca-Cola and Procter & Gamble. I believe you can still enjoy the increases when commodity prices run up while protecting your portfolio. Keep things simple: limit the percentage any one holding has within your portfolio, buy across multiple sectors and industries, and for god sakes, if you hold individual stocks, understand how they trade and what will impact share price both short and long term.