I recently put a hole through the knee of my favorite pair of
blue jeans. I can't say I was too surprised. I think I've had
them for more than five years.
Out of curiosity, I surfed online to investigate the latest
styles. I was tickled to see pants tapered at the ankle are all
the rage, much like the 1980s fashion. Less than 10 years ago,
flared leg pants were in, mimicking the bell-bottoms of the
I don't try to keep up with the latest trend. Buying something
that ends up at the bottom of my closet within a year's time goes
against my frugal nature.
#-ad_banner-#And some trends just don't suit my needs. For
instance, how would I even begin to wear tapered-leg pants with
cowboy boots? My worn-out jeans will eventually be replaced by an
identical pair of Levi's boot-cut jeans -- a classic that has
suited me for decades.
The stock market is a little like the fashion world. There are
always competing tensions between form and function. And this
year, both forces got their due.
Take for instance
. Normally, the consumer staples company is a stable holding.
It's considered to be a slow and steady grower. I'm sure most day
traders would view it as downright boring. But since I notified
The Daily Paycheck
, my premium income investing newsletter, that we would purchase
Clorox on February 19 of last year, it's been anything but
like Clorox were the fashionable darlings of the market when
Treasury yields were historically low. After all, why settle for
a 1.8% yield from a 10-year Treasury when you could get a 3% from
a stalwart equity? But when the Federal Reserve signaled in May
that it might let long-term interest rates rise, steady dividend
payers dropped out of favor. For about a few months they were
less fashionable than shoulder pads. Now that the Fed wants to
leave rates low -- and the economy still appears to be fragile --
dividend payers are back in vogue.
In the television series "Project Runway," host Heidi Klum is
famous for her catchphrase: "In fashion, one day you're in, and
the next day you're out." But when it comes to investing, I'm in
it for the long haul. I don't want the latest fad. I want what
That's why I'm telling my
readers how to survive today's fickle market by following a few
simple tips, which I'll share with you today...
1. Find your classics.
Ignore hotshot fund managers and Wall Street pundits. Find
investments that are suitable for your needs. In
The Daily Paycheck
, my classics are securities with good fundamentals and
dependable and/or growing dividends.
2. Buy more when your classics are out of style.
Wall Street might tell you to avoid out-of-favor securities. But
when prices drop on classic dividend payers, the yields rise.
These are the times I get out my shopping list. For me, this is
the equivalent of finding my Levi's on sale. At a good clearance
price, I'll buy more than one pair.
3. Wait or start small when your classics are in
Because market fashion is fickle, you might just want to wait for
a better price point if your classic is in vogue. Or you can do
something I often do in my
portfolio: Start with a small stake in your classic, and buy more
when and if prices drop.
4. Reinvest dividends.
This is perhaps my best weapon for a fickle market. When one of
my classic holdings is trading at a fashionably high price, my
reinvested dividends buy fewer shares at slightly lower yields.
When my classic holdings are out of favor, my reinvested
dividends buy more shares at higher yields.
If you can follow these simple tips, you'll be well on your
way to navigating the market's short-term noise and creating an
income-generating portfolio that stands the test of time. To get
the most out of your portfolio, however, I recommend readers
follow these tips while using my
Dividend Trifecta strategy
Simply put, the Dividend Trifecta is a three-part strategy
that effectively multiplies the income earned on every dollar you
invest. So far, we've found that it's 43% safer than most
"traditional" income strategies and it's helped me earn over
$50,000 in dividend checks since 2010. To learn more about how
you can use this simple strategy,
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