Markets

Markets Overdue for Bounce: Stay Calm and 8% On

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By Brett Owens

I know itaEURtms tempting, but right now is not the time to flee from stocks to cash. Markets are extremely oversold and due for some sort of relief rally (at least). Liquidate now and weaEURtmre no better than the average investor who underperforms by selling low after buying high.

Plus by collecting our dividends weaEURtmll soon outpace the investors who smartly (or more likely, luckily) sold in September. HereaEURtms why.

Studies show itaEURtms very difficult (and really, impossible) to know when itaEURtms time to aEURoeget back into stocks.aEUR Hulbert Financial recently ran the numbers for BarronaEURtms on the advisors it monitors. It focused on the best aEURoepeak market timersaEUR aEUR" the gurus who correctly forecasted the bursting of the Internet bubble in March 2000 and the Great Recession in October 2007.

These were the clairvoyant advisors who had their clients out of stocks and mostly in cash as the S&P 500 was about to be chopped in half. Surely their clients did great over the long haul, given their capital was largely intact at the market bottoms, right?

Wrong. None of these advisors turned in top performances. The reason? While they were good at timing tops, they were terrible at timing bottoms! The bearish advisors didnaEURtmt get their clients back into stocks anywhere near the bottom. They had their capital intact, but they didnaEURtmt deploy it aEUR" and they largely missed out on the epic bull markets that ensued these crashes.

Peak Fear Often Indicates the PullbackaEURtms End is Near

To reap rewards from stocks . Fortunately we can do this thanks to our aEURoeNo Withdrawal Portfolio.aEUR

To reap rewards from stocks we have to stay in the market . Fortunately we can do this thanks to our aEURoeNo Withdrawal Portfolio.aEUR

DonaEURtmt Withdraw in Years That End in aEURoe8aEUR

While Wall Street preaches a 4% withdrawal rule, we are thankful that we aEURoejust say noaEUR to this gospel during times like these. (ItaEURtms called the 4% withdrawal rule because it recommends supplementing your dividend income by withdrawing 4% from your capital every year in retirement.)

Trouble is, every few years you get a situation like this one weaEURtmre seeing. LetaEURtms take Microsoft ( MSFT ) aEUR" business is great and the stockaEURtms dividend growth reflects that. Trouble is, years that end in aEURoe8aEUR seem to not care! MSFTaEURtms stock price aEURoedecoupledaEUR from its dividend big time in late 2008:

The 4% PlanaEURtms Fatal Flaw

ItaEURtms happening again with the current late 20 selloff dragging down MSFT shares 12% from their recent peak. But do you think that this stock is a sell today? Its increasingly cloud-based business aEUR" and juicy subscription fees that result aEUR" are powering its payout higher (+254% over the last 10 years!)

ItaEURtms happening again with the current late 20 18 selloff dragging down MSFT shares 12% from their recent peak. But do you really think that this stock is a sell today? Its increasingly cloud-based business aEUR" and juicy subscription fees that result aEUR" are powering its payout higher (+254% over the last 10 years!)

The 4% Fallacy Says Sell This Chart aEUR" But Why?

Remember dollar-cost averaging, which you likely used to build your nest egg? Selling now utilizes the same phenomenon but in reverse! In this scenario,A

youaEURtmre selling more shares when prices are low and fewer when prices are high.

ItaEURtms a straight path to prematurely running down your savings. But donaEURtmt despair, because thereaEURtms an easy solution: build a retirement portfolio with an outsized dividend yield. IaEURtmm talking an 8%+ average payout or better . ThataEURtms enough to live on dividends alone with as little as $500,000 saved up.

Pull up our Contrarian Income Report portfolio page, close your eyes and point to your computer screen. The stock or fund you selected aEURoeblindfoldedaEUR likely yields 8.9% or so. ThataEURtms enough to retire on!

These dividends will generate $89,000 on a million dollar portfolio, and $44,500 on the $500K I mentioned. For most folks this is enough cash to ride out these types of storms without having to sell off spare parts from your retirement boat.

The Best 8% Yields for a Bear Market

YouaEURtmve probably been told you should dumpaEUR"or at least reduceaEUR"your stock holdings and focus on fixed-income investments as you near and enter retirement. It sounds like a smart move, but going lean on stocks leaves you open to two big risks:

  1. That youaEURtmll outlive your savings, and
  2. YouaEURtmll miss out on the long-term gains only the stock market can offer.

So why not blend a portfolio of 8%+ bond funds with smart stock picks that provide you with similarly high yields with upside to boot? Sure, they may aEURoesell offaEUR a bit if the markets pull back. But who cares. Like a savvy rich speculator, youaEURtmll be able to step in and buy more shares when they are cheap aEUR" without having to worry about your next capital withdrawal.

LetaEURtms take healthcare landlord Omega Healthcare Industries ( OHI ) . The firmaEURtms payout is usually generous, and always reliable aEUR" yet, for whatever reason, its sometimes manic price action gives investors heartburn.

But it shouldnaEURtmt. ItaEURtms actually quite predictable. Check out the chart below, and youaEURtmll notice:

  1. When the stockaEURtms yield is high (orange line), its price is low. Investors should buy here.
  2. When the stockaEURtms price is high (blue line), its yield is low. Investors should hold here and enjoy their dividend payments.

Investing is Easy: Buy When Yield (Orange Line) is High

Of course this simple timing strategy is much easier to employ . Most investors who sell shares for income spend their days staring at every tick of the markets.

Of course this simple timing strategy is much easier to employ if you donaEURtmt need stock prices to stay high to retire . Most investors who sell shares for income spend their days staring at every tick of the markets.

You can live better than this, generate more income and even enjoy more upside by employing our contrarian approach to the yield markets. We live off dividends alone. And we buy issues when they are out-of-favor (like right now) so that our payouts and upside are both maximized.

Plus 8% Dividends,Paid Monthly, Make Retirement Even Easier

And by the way, you can even use my no withdrawal strategy to make sure youaEURtmre:

  1. Banking 8% annual dividends,
  2. Enjoying additional price upside, and
  3. Getting paid monthly to boot!

If this interests you, IaEURtmd recommend starting with my all-star retirement portfolio. It contains 8 of the absolute best preferred stocks, REITs and CEFs out there.

If youaEURtmre scratching your head at these terms, youaEURtmre not alone. These are investments that you wonaEURtmt hear about on CNBC or read about in the Wall Street Journal . Which is why we have these fantastic opportunities available in this aEURoeno yieldaEUR world.

IaEURtmll explain more about them in a minute. IaEURtmll also show you why my 8% eight-pack is well diversified across all types of investments and sectors, and the cash flows funding these dividends will do well no matter what happens in the broader economy or stock market.

Plus, as I hinted, relentless dividend growth means your 8% yield will be more like 10% in short order.

IaEURtmm ready to take you inside this aEURoeno-worryaEUR retirement portfolio now.A Click here and IaEURtmll show you the 8 bargain investments inside it and give you their names, tickers, buy-under prices and much more !

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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