The Investing Skill Nobody Talks About
The world of investing is one dominated by numbers.
We study revenue, earnings, cash flow, debt, interest rates, credit ratings, valuations, and dividend coverage. We calculate yields, compare multiples, and scrutinize balance sheets. Every quarter brings another collection of numbers for us to crunch.
After all, we are putting our hard-earned savings into an investment with the expectation of growing it into a larger number. After decades of investing, I have come to believe that the most important investing skill has very little to do with your expertise with numbers.
It is the ability to manage your emotions.
A lot of people with high IQs are terrible investors because they've got terrible temperaments. – Charlie Munger
You can be brilliant at analyzing financial statements and still be a terrible investor if fear causes you to sell at the bottom or greed convinces you to chase investments at the top.
The most important investing skill is emotional discipline: the ability to make decisions based on fundamentals rather than fear or greed caused by short-term price movements.
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Investing Is Easy When Everything Is Green
Bull markets have a remarkable ability to make everyone feel like a genius.
An investment rises 20%, and you feel good about owning it. It rises another 20%, and you become even more confident. Your success reinforces your conviction, and higher prices attract even more buyers. Eventually, investors can become comfortable paying prices they would have considered ridiculous only a few years earlier.
The opposite happens when markets decline.
A stock falls 5%, and investors enthusiastically "buy the dip."
It falls 10%, and they may congratulate themselves for finding a bargain.
At 20% down, confidence starts disappearing.
At 30%, the same investor who couldn't buy enough near the top starts wondering whether they should sell everything before they lose it all.
Unfortunately, this is often when investors make their worst decisions.
Buying high and selling low sounds absurd when written on paper. Yet investors do it repeatedly because investing isn't happening on paper. It is happening with their real money.
We All Have "A Lot" At Stake
Investors have vastly different portfolio sizes.
One investor might have $100,000. Another might have $1 million. Someone else might have accumulated $5 million over a lifetime. Yet we all have something in common.
Whatever we have invested is "a lot" to us.
If your portfolio represents decades of saving, working, and sacrificing, watching a substantial portion seemingly disappear can be terrifying.
A retiree watching a $1 million portfolio fall to $700,000 isn't looking at an academic exercise in market volatility. They are watching $300,000 that they spent decades accumulating seemingly disappear.
Fear is a perfectly natural response to stock market volatility. But fear isn't necessarily a good investment strategy.
Markets can change the quoted value of your portfolio every second. You cannot control that, and shouldn’t let that shape your decisions. What you can do is establish another measurement of investment success that you have better control over.
At High Dividend Opportunities, our measurement is income.
Why I Created The Income Method
One reason I created the Income Method was to give myself an anchor through the emotional swings of the market. So instead of asking:
How much would somebody pay me for my portfolio today?
I can ask:
How much income is my portfolio producing?
Those are very different questions. Share prices can move dramatically because of interest rates, market sentiment, economic fears, geopolitical events, or simply because a particular sector has fallen out of favor.
A falling price tells us only one thing with certainty – someone out there was willing to sell at a lower price. It doesn't tell us whether the investment has become better or worse.
Dividends can be cut or eliminated. Companies can experience financial difficulties. Bonds can default. Income investing certainly doesn't eliminate investment risk. That is why analysis of fundamentals and diversification remain essential.
The price quote you see everyday on your account isn’t a fundamental. When one of my investments experiences a decline, more than
How much am I down?
I am interested in understanding
What changed?
Has the company's financial condition experienced deterioration?
Has its ability to pay me deteriorated?
Has my original investment thesis changed?
If the answers are no, a declining price can create opportunity. After all, lower prices allow every reinvested dollar to purchase more income. Two distinct investments in our portfolio today provide excellent examples of this principle. Both are trading around their 52-week lows, which might frighten some investors. For opportunistic investors, this price action gives us a reason to look closer.
Buying REITs At Bargain Prices With RQI — Yield 9.7%
Cohen & Steers Quality Income Realty Fund (RQI) is a large diversified CEF (Closed-End Fund) with $2.5 billion in managed assets, invested across 219 holdings. RQI is a REIT focused fund, with 100% of its assets invested in REIT common and preferred equity. It is noteworthy that RQI’s top ten positions represent almost 48% of its total invested assets. Source
Factsheet
These are best-in-class REITs in their respective sectors.
In recent months, REITs have experienced a sell-off due to a change in the Fed’s monetary policy. Higher interest rates are a headwind for this sector, but investors should remember that new development is at historic lows due to the same reason. Supplies of quality properties are thin, allowing operators to raise rents. REITs are demonstrating strong AFFO and NOI growth through the higher interest rate environment. Take a look at WellTower (WELL), RQI’s largest holding. This healthcare REIT maintains a dominant focus on senior housing, outpatient medical, and wellness properties, and has delivered an impressive 15% CAGR in FFO/share and 20% dividend CAGR over the past five years.
RQI pays monthly distributions of $0.09/share, which annualizes to a 9.7% yield. In recent years, over 50% of the payout has been long-term capital gains, indicating the results of active management.
RQI’s price currently trades at a deeper discount to its net asset value than we have seen over the past decade. This means investors can buy into its powerful assets by paying less.
Regional Telecom Leader TDS Preferreds – Yield 8.5%
Telephone & Data Systems (TDS) is a Fortune 1000 company that provides broadband, and managed communication services to millions of Americans in underserved Tier-2, Tier-3 cities, and rural markets.
During Q2, the company reported $11 million in fiber revenues, up 13% YoY, and delivered 66,000 marketable fiber service addresses. This exceeds expectations, and management upped their full-year guidance to 250,000 to 300,000 addresses, up by 50,000. During the second quarter, TDS made 15,000 fiber net adds, up 47% YoY.
During Q2 2026, TDS Telecom spent $17 million on preferred stock dividends, while reporting $88 million in Adj. EBITDA. TDS holds $2.2 billion in cash and cash equivalents, with $1.7 billion on its own balance sheet (TDS Telecom), and the rest on AD’s balance sheet, which is not directly available to TDS. Overall, TDS maintains excellent cash flows and liquidity levels to support its preferred dividends. The company has two public preferreds that trade at deep discounts to par.
Investors can collect ~8.5% yields today, while the deep discounts to par provide considerable potential price upside if interest rates decline and the market becomes willing to price these preferreds closer to par.
Price Is A Signal, Not An Instruction
Sometimes a falling price is warning you about a genuine deterioration in fundamentals. If we see earnings collapse, rising competition, unsustainable leverage, or an uncovered dividend, the investment thesis has changed and we need to act.
Often, prices fall without threat to the income stream, and this presents an opportunity. Suppose an investment pays $8 of annual income for every $100 you invest. Then its market price falls 20%, while the income remains unchanged. Someone who owned it yesterday sees red on their brokerage screen. But someone investing new money today can purchase that same stream of income at a substantially higher yield.
The same event can look frightening to a price-focused investor and attractive to an income-focused investor.
The difference is perspective.
Your Bills Don't Care What The S&P 500 Did Today
Ultimately, most of us invest because money has a purpose. It pays the mortgage, buys groceries, covers property taxes and utility bills, and funds the retirement we want to enjoy.
Those expenses don't disappear because the S&P 500 is having a bad year.
Our Income Method is designed around that reality. We build a diversified portfolio of income-generating investments (read about our Rule of 42), reinvest a portion of our income (read about our Rule of 25), and focus on the financial health of the companies and funds producing our cash flow.
Instead of allowing Mr. Market to tell us every morning whether we're richer or poorer, we have something tangible to measure: our income.
Investor Takeaway
RQI and TDS-V are very different securities, but have one thing in common. They are both trading around their 52-week lows. Their depressed prices are precisely why they deserve another look. If the fundamentals and income remain sound, lower prices can allow us to purchase more income with every dollar we invest.
A falling price isn't automatically a reason to sell. A rising price isn't automatically proof that you were right.
Price tells you what somebody will pay you today, fundamentals tell you what you own, and income tells you what your investment is doing for you. Learning to separate those three things, particularly when markets become emotional, might be one of the most valuable investing skills you ever develop.
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