Last weekend, I was reading a mainstream financial publication. I came across a section where they had asked several fund managers if the market had topped out.
The answers were definitive.
“Equities are just taking a breather….”, said one.
“The bull is not over yet…”, another declared.
There were a few more equally strong statements.
I wish they had asked me. Although I doubt they would have printed my answer. If they had, it might have looked something like this:
I honestly have no idea whether the bull market is going to continue for another six months, four years or if we’re about to slide 20%. That might not be what you want to hear from a financial “expert” who you (hopefully) read on a regular basis.
But it’s the God’s honest truth.
And the pundits who say, “The bull market will continue higher” or “We’re on the verge of a major correction,” don’t have a clue either.
They may think they do – but they don’t. They really don’t.
I have made my living in the markets since 1996. I have studied market history. I have never come across anyone who accurately predicted where the market was going on a consistent basis.
A few people have made some great singular calls, but they were usually completely wrong the next few times they tried to make another bold forecast.
If you want to make money in the markets over the long term, you need to ignore what everyone is saying will to happen to stocks over the next few months or even years.
Had you not done a darned thing as we were heading over the cliff in 2008 and simply held your positions, you’d have made all of your money back and then some. If you had listened to advice on when to get out and get back in, I guarantee you would have bought back in too late.
Even now, there is a ton of money sitting on the sidelines. Over the past two weeks $7 billion has been pulled from bond funds while only $4.1 billion flowed into stock funds. That suggests there’s nearly $3 billion sitting in cash – and that’s just for the past two weeks. This trend has been going on all year.
It just shows that many investors missed out on some serious gains this year. Had they simply held on through the Great Recession, they’d have been way better off than they are now.
So, how should an investor go about making money in the markets while ignoring the pundits?
By owning quality stocks that raise their dividend each and every year.
You get to participate in the growth when stocks go up, and then you get paid to wait when stocks go down.
And if you invest in stocks that raise the dividend every year, the yield on your original cost goes up. Today, you may be earning 3.5%, but perhaps in the next bear market, your yield on original cost will be 6%. That makes it a lot easier to ride out tough times. And the longer you hold on to these stocks, the higher the yield.
Let’s look at an example…
Five years ago, if you had bought Kimberly-Clark (NYSE: KMB), you would have received a yield of 4.8%. Today, your yield would be 6.8%. If you had bought it 10 years ago, your original yield would have been 4.0%. Today, you’d be collecting 9.8% on your original investment.
You would have ridden the ups and downs of the market, all the while collecting your dividends. Incidentally, Kimberly-Clark nearly tripled in price over the past 10 years.
And if you owned Kimberly Clark since 2003, were collecting 9.8% every year (and likely more next year as the company has raised its dividend every year for 41 years) and the market drops, would you sell your shares?
Doubtful. Unless you thought Kimberly-Clark was in for some serious problems, you would just keep collecting that ever-increasing dividend, which allows you to ride out the storms and hold on to stocks that outperform over the long term.
So the next time you read or hear someone’s prediction about which way the market is going, just hold your dividend stocks and ignore them. That’s the best advice you’ll hear an “expert” give all year.
Editor’s Note: Marc recently completed his latest report on how to supercharge your retirement account. According to Marc, this strategy can help anyone generate anywhere from 600% to 2,100% higher returns, over time, than the average investor. And it involves a little-known retirement plan called a Section 703 IRA.
To learn more about these Section 703 IRAs, click here.