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(This article originally appeared on The DIV-Net) Wow, these markets are in no way fun! I don’t know about you, but I am sick of the volatility, the fear that we are seeing in the market, and the relentless pontification of the newspapers and media companies covering this like it is the end of the earth. These media companies love this kind of stuff because it sells paper. I however have decided to ignore as much of it as possible and stick to my main investment objectives. It is simple really, and it is one that I am confident that will carry me for many years to come.
Markets go up and markets go down. Remember, the tech bubble? That was supposed to be different. Remember Y2K? That was supposed to change it all. Remember 911? The markets were never supposed to be the same after that. My guess (and it is a guess) is that when we look back at this in 5 to 10 years time it will be more of the same. Just a period of intense volatility that while it was happening seemed like the end of the world was coming. Could I be wrong? Sure, but history has told us each and every time that the market recovers eventually and goes on to surprise us with new highs. Time will tell.
Where does that leave me today? As a dividend investor I have been doing some thinking and have come to the conclusion that even with these intense markets, I really have only two investment objectives. The first is to conserve my investment capital. That means that I need to continue investing to a sound and diversified asset allocation that portects me from the risks of an all equity portfolio. That means being not only in fixed income stocks, but being in emerging markets, REITS, and small-cap stocks.
The second investment objective is to continue on with my strategy of generating reliable and growing stream of income from stocks. This way, I do not need to worry about prices too much and instead can focus on watching my portfolio continue to throw off cash and eventually a growing stock price as well. History has proven that increasing dividends has the effect of raising stock prices over the long term. In the end, I believe that my stock prices will catch up once again.
Of course, I could be wrong. However, I am not going to look at the newspapers to tell me what to do…
TDG,
I like that you have your plan and you are sticking to it. Your asset allocation is definitely a good one to consider.
Yes, your strategy is the right thing to do during this time. It is sad how many people don’t know to follow that kind of strategy. Now is the time to hit hard while the prices are low.
When you are a dividend investor it is easy. When you initially invest in the stocks you have you know they are good for the long run. All this kind of situation does is bring you more shares by re-invested dividends and buying more of great stocks at discounted prices.
“That means being not only in fixed income stocks,” . What do you mean by fixed income stock? is that bonds?
The financial crisis is spreading to all the sectors and the ultimate results will be available by the end of 2009. Anyway the crisis is very crusial to all western markets since its a prestigeous counter movement from these governments and it should show some good results by the mid of next year atleast. But in terms of asian countries, it is a good opportunity to find alternative solutions and reconfirm their best practices followed over the past years. Some of the basic causes of financial crisis is, bad credit loans processed by the financial institutions to the customers and third parties. But in case of growing markets, most of the banks are assuring the creditworthiness of their clients twice since most of the clients are not high profile clients. Hence this didn’t make much impact on their financial systems and processed loan payment shedules.
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I think this is a good strategy. Have you considered investing in other markets outside the U.S.? I’m working with this company in Germany called the MORE fund, which is a part of Innoveas (www.innoveas.com). They’ve formed a group of IPs coming out of Germany and offer a great investment opportunity. I’m just learning about this myself. It can be confusing and I think it can helpful having a company guide you along the way.
Once people feel at least have an understanding of investments then they should look into dive in. Never lose or tend to lose and keep vigil while investing will certainly brings victory.
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Besides buying stocks, investing in forex and make money can be a good option in the long term.