The market was seeing a bit of an overdue bounce for a good part of the day, but late comments from Federal Reserve chairman Ben Bernanke about further policy accommodation got investors nervous and we saw all the gains evaporate by the closing bell. We just added a new name to our recommended list today. We continue to position our favorite names for the period ahead.
The late-day slump did not pull all stocks lower, as we saw shares of Nike ( NKE ) and Visa ( V ) finish nicely higher. McDonald's ( MCD ) managed to beat out a small gain following an analyst upgrade. There were some big misses in the retail space as Talbots ( TLB ) and Pep Boys ( PBY ) saw shares get hit very hard following earnings commentary. Also taking a hit in today's trading were shares of Wynn Resorts ( WYNN ) and Best Buy ( BBY ). A common stock offering announcement from Cliffs Natural Resources ( CLF ) had shares down more than a $1.
Prudential just released a survey of 1000 investors between the ages of 35 and 70, with which 44% of those polled said they would never invest in stocks again. Now this doesn't shock me in the least bit as we have been through some volatile market action in the last decade (dot-com implosion, mortgage/real estate meltdown, and a couple of recessions as well). The problem is that many individuals who had money in the markets during these periods made the mistake of doing nothing when the trouble was just getting started. I talked to many who decided to just stay the course until the selling really started to hit, then decided to take their lumps after the market already dropped significantly. Now I usually don't advocate market-timing, but for many stocks (especially non-dividend momentum plays - the Nortels, Lucents, AOL, JDS Uniphase, Yahoo, Cisco, and many more), they were simply trading vehicles for the most part. There was no dividend support and mom and pop shareholders were left holding the bag. Investors spent years chasing these stocks higher as they did with real estate in the bubble.
Now if you are young enough, some of the poor investments you make, could eventually come back, but there have been too many older investors rolling the dice unnecessarily. As one gets older, the need to pay attention to asset allocation becomes super-important. As I mentioned in yesterday's newsletter, the job environment for older workers (55 and older) is deteriorating, so the ability to bounce back quickly and easily is not a enviable situation. The problem with taking the road of not investing in stocks is that there are not many other situations presently where one can invest and continue to outpace taxes and inflation. What are your options? Money markets and checking accounts that offer you barely above 0%. Real estate requires a decent chunk of money to put down to get started building a portfolio that can produce positive cash flow. A decent option is buying a business if you have the experience and skills necessary to succeed in your niche. The one advantage you have when it comes to financing for a business purchase is often times you can ask the owner trying to sell the business to hold the paper for a loan.
At the end of the day, investing in dividend stocks is something you can get started with even if you don't have much capital at the moment. If you can do what you can to buy income-producing assets, you will certainly start seeing your net worth growing in time. Dividend investing does not require a special talent, education level, years of experience, luck, or much money either. It requires a commitment from you as an investor that you will keep putting money to work each month in the best ideas available (that would be from our recommended list). That's all investing is everybody! The material you find on our Dividend.com site and some great stuff you will read in my book will help you get to where you want to be financially.
Dividend investors that are looking for income should not be distracted by the headline grabbers and instead be looking for opportunities in companies that are currently on our Best Dividend Stocks List. Our main focus is on quality dividend names with attractive yields, and this should be the main focus for all those that are hoping to build income for the long-term. We will continue to parse through our data to make sure only the names we like best remain on our recommended list. Remember, if we downgrade stocks from the list, it is not a sell call! Only in very rare instances will we advocate liquidating positions in a formerly recommended name. We just want to have the best names from a risk/reward standpoint on our recommended list for new money at all times. Investors should however utilize a sell strategy in the event a company you own drops 25% from its 52-week high and there are company-specific problems that could cause additional significant underperformance for that particular stock.
Thanks for reading, and I'll see you tomorrow! P.S. Please pass this e-mail on to someone you think can use some financial motivation as well as being kept in the financial news loop that could affect them.
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