On Friday it was reported that unemployment hit 6.1 % the highest level in five years as employers cut 84K payrolls. The SPY, DIA and QQQQ’s all opened lower and proceeded to lose even more ground as selling accelerated. Oil declined as well, which was not a positive, as it dragged down oil related stocks like XOM, CVX and BP down with it. But somehow, despite all the gloom of the deepening of the recession and higher unemployment, the stock market finished the day in the black.

 

Submitted: Sep 8, 2008    Views: 77    Comments: 2    Likes: 2   


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Comments Received:

Sam Cass
Sam_Cass

I like the contrarian angle to your article. I believe the only time to buy is when everyone else wants to sell. I'm not sure I believe as much in buy and hold. It really depends on your time horizon. For a 20 year told, buy and hold is fine. For an older investor, there may not be enough time to recoup money.

Consider that the Nasdaq is still at 50% of its 2001 high. How long does an investor need to hold for that one to come out even?

Posted: Sep 8, 2008

Author/Submitter Response:

I am a big believer in buy and hold fundamentally solid companies. I would say that the reason why nasdaq is still below its 2000 high is because the P/E ratios got unsustainably high. In addition to that few tech companies pay dividends ( only 31 % of them). In contrast, both Dow and S&P 500 did exceed their 2000 highs last year.
My strategy focuses on buying and holding solid dividend growth stocks with a good long-term track record who pay and increase their dividends to shareholders.

JRodgers

I echo Sam's sentiment exactly. I would also note that these so-called long-term entry points where those with a longer term horizon should get in are few and far between. People were speaking on CNBC about a long-term horizon and Lehman when the stock hit 30. The market is very volatile right now, with even oil getting crushed now. I am not sure we aren't going to see a better entry point in 6 mos to a year when fully all of the sellers are throwing in the towel.

Posted: Sep 9, 2008

Author/Submitter Response:

Well we might see a good entry point lower or we might not see it. The problem is that whenever people are speaking about buy and hold, they only have a specific asset in mind. However, if you diversify well in assets suchs as large cap, mid cap, small cap domestic and international stocks as well as some fixed income and real estate investment trusts you should do well over large periods of time like 20 years.
My focus is to get diversified with solid dividend paying stocks, which have increased their payments to shareholders for more than 25 consecutive years, through good times and bad times. The dividend payment which make the yield component of the total return equation is much more predictable than the stock price returns. Thus if you pick solid dividend stocks, you won't care as much about the daily/monthly/quarterly price flucutations as long as the dividends are paid and profits are decent.
It's that simple really- keep it simple :-)



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