The US markets hit new highs and that means one of two things – either it will set a new high again or the market will decline. How much a decline no one knows. If you believe the markets will decline, then it is good to take profits and be willing to buy something else at a lower price which has the ability to climb upwards whatever the markets do. Most of my portfolio is buy and hold, till something better comes along. There is a portion which is situational, if a company is being bought out and there is a fight or more money will be needed to be offer, it is possible to buy into the stock. If the proxy fight says if you vote yes, you will receive a bonus of either cash or money, it is possible to buy and receive the money. Given the bulk of the portfolio has dividends, after dividends are paid and there is cash in the account, more shares can be bought, which means you can always pay attention to the markets just you do not have to trade every day. It could be twice a month, you have the luxury of time.
If you believe in selling and waiting for the decline, the lesson of the past, is that stocks have declined 10% of more, however you will need to be very disciplined to buy into the market to take advantage of those declines. This means if you want to sell, you still have to know what is a good price and the expectations of why the price will tend to go up. It is very similar to your Holiday or Christmas shopping, all retail stores have sales, are they the best sales or it is advertising? Is the sale just taking a portion off the normal markup or is the sale needed to move inventory? For example if a company typically marks up prices 50% so a $10 item costs $15 and then has a 25% sale or the item is $12.50, it looks like a sale but the store is still making 25% on their $10 item. There is a savings over the normal price, but is it the best sale?
When someone goes into cash, they are often looking for the bottom of the market, but no one knows where the bottom is until stocks have climb. All analysis is based on the past, and you will eventually hear the market made its bottom, two weeks ago and now we are on the recovery stage. This tends to mean, those waiting for the bottom, miss the bottom. At they ready to invest? because usually the line is not straight upwards but trends over the month. Personally I find it better to own some shares in order to continue to pay attention to the companies which I have a bias in. If you watch the companies and the sector, you will know whether a down quarter is making a few dollars or half a billion or a billion dollars, depending on the size of the company. You continually need to do your homework to have the confidence to buy again.
Linking to dividend paying stocks, markets go up and down, but if you buy profitable companies that pay a dividend and be ready to hold them. There are many times the market rewards profitable companies to trade a higher multiples than pure growth stocks. The higher multiple plus the dividend makes you wealthier at the end of the year and that should be the number one goal, to try not to lose money.
There are more questions than answers, till the next time – to raising questions.