Building Wealth in Any Market!
by Nich Sheldon
Many investors alike would love to believe that the market as
well as the economy is growing stronger with each passing week.
It's easy to believe, especially since the cornucopia of economic
data has been upbeat for the better part of the year. On the
other hand, I feel that a new tide is on the horizon.
Call me crazy, but the current market trend resembles that of the
secular bear market of the late 1990's. From a historical
perspective, most secular bear markets usually take at least ten
years to settle. For instance, half a decade ago we had a
sixteen-year secular bear market (1966-1982), which featured four
recessions. Ready for the kicker? During this time span, there
was a five-year upswing, which was mistakenly thought to be the
beginning of a new bull market. Sound familiar? How about the
tech rush of the late 1990's? One could practically throw a dart
at a list of tech stock and ride that stock for a gain of 50-150%
over a two or three-year period. Low and behold, April 2000
arrives and the bubble popped, as well as most tech savvy balance
Does this mean that I am bent out of shape over what to do to
diversify my portfolio? Does this mean that a wise trader would
pull all of his/her money out of the market and wait for a
confirmed bull market? Does this mean that we should lose all
hope of earning ten percent per DRIP year over year? The answer
to all of these questions is a firm NO. The reason I have told
you this is not to scare you, but more because I want you to know
that secular bear markets can be not only an asset to the long
term trader, but a chance to add shares at lower premiums, which
usually means you are getting more for your money.
The truth is that long-term bear trends are almost always
accompanied by changes to nearly every industry. If you think
about it, each company is going to do what it can to remain
producing positive earnings no matter what type of market they
are in. This means that each of these companies is going to have
to adjust to the markets new conditions. This change alone
usually creates exceptional opportunities for the long-term
This, my faithful readers, is why I love dividend-bearing stocks.
John Mauldin, author of "Bull's Eye Investing," noted that
dividends account for about 40% of the 10% average annual gains
returned by the broader markets.
Another thing to keep in mind is that stocks that offer dividends
are -in a general sense- usually the strongest companies to
invest in. This means that those of you invested in dividends,
are going to benefit from the strength that these stocks see when
the market and the economy improve. Secular bear markets always
have upswings, or bullish counter-trends, which dividend
investors can see capital gains in, if they are willing to sell.
Historically in down trends, thousands of investors saw their
dividend portfolios become growth stock portfolios, and I intend
to help you capitalize on this in the coming years.
How about one last tool to put in your toolbox? New tax laws
have reduced the rate on dividends by as much as 50% for most
investors. This change has helped to urge a significant increase
in dividend yields, and you, my friends, are among the few
investors who know about this.
A word to the wise...
Stocks that offer dividend reinvestment plans are basically
offering their investors the opportunity for absolute returns.
This means that no matter how poor or well the market is
trending, you are going to receive a payout, quarter after
quarter (in most cases). This means you need to choose your
dividends wisely, and focus on the fundamentals, as well as the
technical catalysts, that may make or break your portfolio. It's
an exciting time to be a dividend investor, and I hope to educate
you as well as inform you of wise dividend reinvestment plans for
years to come.
This ends another exciting episode of the DripAdvisor.com News
and Views. On Friday, I will spotlight another
stock worthy of the DripAdvisor.com limelight.
Until Next Week,
Editor In Chief