“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful.”
Markets continue their march onwards and upwards, and show no signs of taking a break. Everyone knows the Warren Buffett adage “Be greedy when others are fearful.” However, it was the first part of his quote that people often miss or gloss over in a rising market – “Be fearful when others are greedy…” It seems investors, and the general public, have once again become complacent to rising stock prices.
For investors who have been through the Financial Crisis, the current market highs are once again ringing warning bells. While we may be coming up to a market correction, it may not be a crash. This is a point Ben Carlson drove home in his earlier post, Are Stock Market’s in a Bubble?
If you sell now, will you be able to time your entry point back in? Many people believe they can, but in fact timing the market is impossible. Many an investor has sold a position, only to try to buy back in and missed the bottom. Or they have sold, and continued to watch the stock price march upwards.
I’ve met people who had the acumen (and luck) to sell their stock holdings in 2008, before the infamous crash. They had a strong conviction towards selling to maintain their capital, and felt confident enough to make that decision. They saw greed and optimism all around, and had a hunch something big was coming. They sold at an opportune time and they were lucky.
Many investors have again been asking those pivotal questions. Should I sell all my stocks? What should I do? Index investors have it easy because they simply re-balance their holdings on an annual or semi-annual basis. This takes the guess-work out of when to sell. For long-term dividend investors, such as Dividend Growth Investor, selling isn’t even a consideration. For these dividend investors selling would be akin to chopping away at a cherry tree, that bears fruit (an analogy from my friend Dividend Mantra).
I’ve been asking the same questions myself over the last few weeks? What would I do differently if I knew my portfolio would drop 50% tomorrow? How would I change my portfolio if I knew? The answer is I probably wouldn’t do anything differently, and there is no need to. In fact, by selling, I would negate all my future dividend income, and potential for future gains. Would losing my monthly income stream be worth it?
The Weekly Lineup
Here are some great reads from around the web this week:
At Critical Financial, I looked at the billions of dollars sitting in dormant bank accounts and unclaimed property. I asked the question, Are You Leaving Money Behind?
Is your blue-chip dividend stock under-performing? Is it lagging the index? Thought of selling? In his post at the Globe & Mail, John Heinzl reminds investors why sticking with the dividend investing strategy through thick and thin pays off. In Why You Shouldn’t sell Your Coke Shares, John reminds us about Coca-Cola’s 52 year dividend growth history. Be sure to see the chart at the bottom of the post!
Here is another successful investor embracing the dividend growth strategy. Along the same line of thought, Dividend Mantra shares his Dividend Income Update for March. Mantra is doing a great job, now breaking the $700 per month in dividend income!
Have you heard of the Canadian Dividend All Star List? Neither had I until recently. This list is composed of Canadian companies that have increased their dividend for 5 or more calendar years in a row. Fortunately a diligent Canadian blogger has done the research and provides the list here, which he updates regularly. Fortis Inc. is at the top of the list with 40 years of dividend increases.
On the Outlier Mode, staff writer Taylor looked into 7 Gap Year Sites for Adults. If you’re not familiar with the term, college students have been doing this for years. But now adults are taking part to escape the 9-5 grind. They are traveling, volunteering, working abroad, or learning a new skill while getting a much-needed break.
Have a nice weekend everyone!