Buy, Sell, Or Hold?
Topics: stocks, finance, markets, investing
The markets continue to be tumultuous and we’re seeing the markets re-test the lows that were reached in August. Since October 29th, the S&P 500 is down 8.5%, the Russell 2000 is down 10.7% and the emerging markets are down over 15%. Even energy stocks are getting hit hard. Should you be selling stocks, gritting your teeth and hanging on or be stepping up to the plate and buying?
To answer that question, you can’t just look at the headlines or your account value and decide whether or not action should be taken. The market headlines are based on averages. Movements of the bigger companies in the averages can easily skew the performance. The financials have been getting hammered lately and financials make up a large part of the S&P 500.
Of course, that doesn’t mean that other stocks are immune. Investors (and traders) can panic when they see the decline of the averages and they sell everything. And sell they have.
The decision to buy, sell or hold shouldn’t be based on the overall market. It shouldn’t be based on fear or greed. I believe we need to look at individual holdings to determine which action we should take.
I don’t know of anyone who has stopped using their telephone or internet based on the recent decline in the market. You’ll continue to use it and you’ll continue to pay your phone bill month after month. That’s money the telephone companies can use to grow their businesses and to pay dividends. Rural telephone companies also receive subsidies from the U.S. Government. This represents a very stable cash flow.
To say that differently, a rural telephone company’s ability to pay their dividend usually isn’t affected by the economic cycle. That’s one reason I regularly use them in my clients’ portfolios.
That hasn’t prevented a sell-off of these rural telephone carriers of late. Those buying these stable companies now are handsomely rewarded by higher dividend yield (many now in the 6-10% range).
The underlying businesses of these companies haven’t changed. Their ability to pay and increase their dividends hasn’t changed. So it’s hard to justify selling them now. It’s quite easy to build the case for buying them.
Another group of securities that haven’t been fairing well lately is the closed-end bond funds. Typically, bond funds do well when the stock market is falling and interest rates are going down. Credit-related panic selling, though, has driven the price some quality shares down 8-10%. Will the credit crunch adversely affect these holdings?
I don’t think it will. There are closed-end funds with attractive portfolios of bonds that can be purchased for less than the underlying costs of the bonds themselves. For instance, a sovereign government fund isn’t going to be adversely affected by the sub-prime mortgage situation, yet these shares have been sold-off just like everything else. But they continue to pay their dividends and have yields over 6%.
With the 10-year U.S. Treasury now yielding less than 4%, these are very attractive yields. As market fears subside, investors looking for a higher level of income will once again recognize these securities and move money back into them. That should bring a recovery in their share prices. In the meantime, we continue to earn over double the 10-year Treasury note.
In short, if we just look at the headline numbers of the major stock market averages, it’s easy to come to the conclusion that we should get fearful, sell off stocks and move a large part of the portfolio to cash. When you dig below the headlines and do some research you see that there are high-quality, defensive companies that make sense to continue to hold and to buy more.
I’ve just highlighted a few examples. The market downturn, in my opinion, has also created some attractive opportunities in growth-oriented companies. In particular, I like companies that are part of longer-term global trends. For instance, global growth and the need for alternative energy have spurred tremendous demand in several industries. Those stocks are now very attractive.
The key is to not run with the herd. When everyone is rushing for the exits, those brave enough to stay behind can pick up some real bargains. I believe that now is one of those times.
Nationally-syndicated financial columnist and Certified Financial Planner Jeffrey Voudrie provides personal, in-depth money management services and advice to select private clients throughout the USA. He’ll answer your financial question FREE at www.guardingyourwealth.com.
Previous Articles Highlighter:
Things To Consider On Applying For A Home Loan (1)
At this point in the transaction, you must be really getting a lock-on target on your realistic limits concerning your prospective home, since you are slowly reaching a particular figure on how much you can get and how this will fit your budget.
What Is Whole Life Insurance? (2)
This is not always the case with term life insurance where an illness can prevent the person from getting the policy. It should be understood that whole life insurance often requires that the policyholder pay premiums for the life of the policy.
Creating Multiple Profits To Increase Your Net Worth (3)
Topics: Profit, Multiple Profits, Business, Wholesale Products, Affiliate Programs, Advertising If you feel like your current business is not earning you enough money or it seems to have reached its money making potential, but you are still interested in generating more income then you can branch out from the main focus of your business to create other streams of income.
Advice For People With Debt Woes (4)
So look into this as well. Reorganize your finance - Calculate how much money comes in every month. Then monitor where and how your money is going out.
Mortgage Refinancing In All Its Aspects (5)
This could end up costing you more than you had bargained for. In certain kinds of refinancing, the borrower is supposed to pay a certain amount upfront if he wants to secure the new mortgage.
Property Rental Requires Research (6)
They will differ from area to area. Thus, you will have to do a great deal of looking around. You will need to keep all the rates in mind at all times.
Effectively Negotiating A Mortgage Loan (7)
If you want to get a good rate on your home mortgage, you will need to look into the many factors that can raise or reduce your costs. Take a look at some of these factors: THE LOAN TYPE There are many loan products out there that you could avail of.
Debt Consolidation Is A Way To Debt-Freedom (8)
This method of getting rid of debts has proved to be most useful in the case of credit card debts. Since credit cards can carry a significant amount in penalties, and a relatively larger interest rate then most unsecured debts, having several cards, each with its own set of terms for servicing, can become a complex matter altogether.
Real Estate 101: Choosing The Right Home Inspector (9)
If there are problems with the home, you may be able to negotiate a lower price or you may be able to insist that the seller make the necessary repairs before the deal is closed.
Make The Time To Balance Your Checking Account (10)
If you notice a skip in the sequence, you know that you have checks out. Peter Kenny is a writer for The Thrifty Scot, please visit us at www.thriftyscot.co.uk and www.thriftyscot.com www.thriftyscot.com
Remortgaging When Your Credit Score Is Poor (11)
The procedure is not too difficult once you have done all the groundwork and have made the choice about which creditor suits you best. Remortgage with Poor Credit at www.thriftyscot.co.uk Is it hard to get Remortgage Bad Credit?
How To Finance A Spanish Property (12)
Shaun Parker has been working in the mortgage industry for a number of years. He works for Procoal where he shares his expertise to help people find the right deal for them.
Business And Banking: A Partnership Forged In Success (13)
Show how you will repay any loans taken by giving a precise idea of how and when these payments will be made. Try to avoid the 'head in the sand' syndrome, if things start to go wrong and a cash flow problem arises, keep the bank informed, they will be far happier with this than you ignoring all their phone calls.
Do I Have To Pay My Mortgage With Closing Cost? (14)
Its a good idea to review all fees with your lender. If you have any questions, dont hesitate in asking them. Try not to be frustrated or worried about paying so many fees.
Getting Legal With Your Realtor (15)
While you may be anxious to close the deal and to finally move into your dream home, there are many legal issues you to contend with before you finalize your purchase.
Investor Financing In This Crazy Real Estate Market (16)
2. Full Documentation Loan: These loans provide the most favorable rates, terms and allow a lower credit score. The minimum down payment is still 10%. You must show tax records, liquid asset records and income statements (P&L if business owner) to qualify.
Jumbo Mortgages VS. Regular Mortgages (17)
There is more risk on a jumbo mortgage. The interest rate on a jumbo mortgage depends on the amount borrowed and the property taxes. Being based on these two things it can really raise the interest rate on the jumbo mortgage.
Winning The Game To Financial Freedom (18)
This round educates you on the difference between personal IRA's, Roth, and 401k. As the market fluctuates, you can determine the investment possibilities; which investments are less of a risk.
Modified Internal Rate Of Return: Predicting Your Investment Profits (19)
In the end, the modified formula tells you whether the deal is worth it or not. Before you can understand the MIRR, you need to be familiar with the internal rate of return.
The Property Business Is A Business Of Relationships (20)
Topics: property business, property, investment, power team, relationships You are the same today as youll be in five years except for two things, the books you read and the people you meet - Charlie Jones.
Newer Articles Highlighter:
When Car Insurance Is Your Friend (1)
- Personal Injury Protection (PIP): This policy type covers for medical expenses, lost wages and other similar expenses arising in an accident, wherein there is no serious bodily injury. - Comprehensive Coverage: This policy type covers for damages caused by theft, flood, and fire and so on.
Clean Up Your Finances Before You Invest (2)
Some are very expensive and others are very affordable; it pays to shop around. Denise Villani is an author and the webmaster of several websites and article directories. Find more articles and information on investing by visiting www.basicinvestingstuff.info.
Thoroughly Investigating The Personal Loan (3)
The new loan will only require small installments every month. If it wasn't for the personal loan, you would have to gather a lot of money to clear your debts.
Second Career: In Retirement (4)
Passing knowledge of what you have learned in your past career, weather it be skill-sets, technical aspects of your career, or tips-and tricks. Students are hungry for knowledge and what better way to gain that knowledge than from someone who actually made a living in that career.
New Orleans Housing Market Is Set To Heat Up Soon (5)
Give the real estate agent your criteria for purchasing a rehab house up front and let them find a good deal for you. Of course, we're assuming that you've had plenty of education and experience in rehab investing.
Who Caused The Housing Bust (6)
No one is to blame when everyone is making money. But when a market correction is staring us in the face, people are quick to point the finger. Just check out the blog sites that are bashing real estate agents, mortgage brokers and overzealous investors.
Annuities: Consumer Alert: Equity Indexed Annuities (7)
Your ability to sleep at night is more important then the chance of earning a few extra bucks. So here's the bottom line, in my opinion. If you are looking for income, don't invest in an Equity Indexed Annuity.
Baby Boomer Business Sellers - The Rush To The Exits Could Erode Company Valuations (8)
This is a risk avoidance strategy that ties the total acquisition price to the future performance of the business post acquisition. It is also designed to keep the business seller engaged in the near term performance of the business.
Pay As You Earn Wages And Salaries Tax Scheme Explained (9)
The PAYE calculations and production of payslips is an essential function of payroll software that many employers adopt to ensure accuracy and compliance with the regulatory bodies tax rules. The second major area of PAYE administration is for employees to deduct national insurance contributions from employees.
Finding Cheap Bankruptcy Lawyers For You (10)
But before you do that you would have to find yourself a cheap bankruptcy lawyer who can explain to you all the finer points of the new law and can get you a good deal.
Liability Car Insurance Protects You (11)
Liability auto insurances dose not cover you or other people on your policy. When you are at fault in an auto accident, your car insurance company pays the damages.
How To Earn Extra Money On The Weekends (12)
such as restaurants or residences. Use Your Knowledge Put your knowledge to good use. Are you good at teaching math? You can choose to be a math teacher.
Top Paye Questions Answered (13)
What does week 1 of month 1basis mean? Week 1 and Month 1 basis is an instruction to the employer operating a PAYE scheme to not calculate the income tax on a cumulative basis which is the normal basis but instead the employer has to calculate the income tax to be deducted on a non cumulative basis.
Day Trading Psychology - An Unspoken Rational Approach (14)
Remember this simple rule that will build your trading confidence like nothing else: Exit any trade that doesn't go your way immediately. Forget about the commission, forget about how many hours you waited for the setup, forget everything except this rule.
Using A Credit Union For Your Savings (15)
This huge number of participants is not a fluke. There are reasons why people choose unions over banks. One thing you may notice about credit unions is that they do not advertise themselves very much.
Basic Types Of Health Insurance (16)
If you use non-authorized providers or receive non-authorized care, your insurance will not pay any portion of the bills. Because many people did not like these restrictions, managed care has begun to evolve to include hybrid plans that blend HMOs with some of the features of indemnity health care coverage.
How To Choose A Debt Consolidation Company (17)
This forces you to switch cards yet again, which is okay as long as you remember to do it. Otherwise the charges are piled on again. Eventually, if you are not careful, you are trapped into credit card debt with high interest payments and even more debt than you would have incurred by leaving it as it was in the first place.
Not Knowing The Rules Governing Employee Or Self Employed Status Could Cost Thousands (18)
General rules which would indicate a worker was an employee would include scenarios such as is the work supervised, does someone state when, what and where work is done and how it should be done.
Housing Market Inventory For November (19)
The current housing market inventory across the country at the present time is challenging to say the least. The same holds to be very true across Florida generally and in the Tampa real estate market as well.
How To Buy Pre-Foreclosures (20)
The greatest advantage is you will also have the luxury of dealing directly with the owner - no third parties involved. You as the buyer get to be in total control of pre-foreclosure sale.