Your Common Sense Advisor Week In Review: Successful Long Term Investing.
US Stock Market Trending Up
Canadian Stk Mkt Trending Up
US Bond Yields Yields Trending Down
The theme that I have been communicating since February is that U.S. growth is slowing, interest rates are declining, inflation is accelerating and the U.S. Dollar (USD) is weakening. And since then I have been advocating favoring of bonds, real estate investment trusts, high-yield utilities and slow-growth dividend paying stocks.
The only thing that has changed since then is that overall inflation appears to be moderating somewhat as oil prices have declined over the last few months.
I believe in the concept of diversification and take that concept further than they typical Wall Street System advisor.
Sure, like the Wall Street System, I believe that it is prudent that one should diversify risk by allocating monies among stocks, bonds and cash. I also believe that there isn’t such a thing as a perfect investment strategy. For instance, many credit Warren Buffet as great investor—and he is. That doesn’t mean that his strategy is perfect for you.
There are advantages and disadvantages to every strategy. So, if it makes sense to diversify investment risk by allocating money between stocks, bonds and cash, doesn’t it also seem prudent that you should also diversify among various strategies? I think so.
“Buy and Hold” can be a valid strategy but I wouldn’t ever rely solely on it for a client’s portfolio because that strategy doesn’t provide any downside protection during a market correction or crash.
Since I manage money for those that are retired or near-retirement, preventing significant losses is something that I take very seriously. Nor would I put 100% of a client’s portfolio in a trading strategy regardless of how effective it appears to be. It’s simply not prudent.
Successful long-term investing is more about managing risk than trying to “beat the market.”
The trending indicator that I follow (and that is used by several of my equity trading systems) switched from a down trend back to an uptrend signal last week.
As a result, I have been moving some money back into the equity markets.
I don’t know how long the indicator will continue to remain green because these markets aren’t showing a lot of conviction and there is little momentum to the upside during a declining economy, but I don’t invest based on my gut because there isn’t any way to create a systematic process that relies on my ‘feelings’ or my ‘hunch’ about the market.
Even though some money has been added to equities, I continue to be cautious and have a significant portion of the ‘typical’ account allocated to bonds and/or stocks that act like bonds.
I am also cognizant of the heightened geo-political risks that currently exist (and which I detailed in last week’s week-in-review).
There are people out there that wake up every morning looking for a way to harm America. This Thursday is another anniversary of 9/11. That was a significant date in the crash of 2008. And last year we saw the successful attacks on Benghazi.
Since then, we have seen ISIS/ISIL/IS take over significant territory in Iraq, the beheadings of two American journalists and increased threats of an attack on American soil. I pray that this 9/11 will be uneventful. Still, this is not the time to be aggressively invested.
“The only thing necessary for the triumph of evil is for good men to do nothing.” (Edmund Burke)
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