One can't read the investment blogosphere without reading alot of opinions about getting out of the market, holding cash, there are no good investments out there, etc. Then one reads about the historic low price per earnings of major blue chips paying record dividends. What's a cautious amateur to do?
I'm doing what most amateur investors do; I'm DRIPPING, watching my average cost per share continue to decline, reinvesting dividends broadly across my fairly broad portfolio, looking for selective opportunities to put international exposure into my portfolio by either investing in multi-national corporations or the best of breed in other countries with similar dividend-growth characteristics as my US holdings.
I'm not smart enough to time the market, so I'm relying on dividends to blunt losses, rising earnings/dividends to drive valuation, concentrating on building a sustained stream of increasing income and hoping to minimize portfolio volatility in the process.
I'm simply not up to the task of doing my own technical and fundamental analysis, so I read the summaries of others, compare and contrast different opinions and stick to fairly large cap, widely traded issues. If I find a small-cap with blue-chip dividend growth credentials, I'll establish a small position, get to know the company over time. If I don't see a thesis for sustained performance developing over 2-3 years, I'm moving on. The winnowing process appears to be working, as my returns are decent in spite of a very erratic market over the last 3 years. My sector and country EFTs haven't done nearly as well as single companies, so I'm bailing on that form of diversity and looking for good businesses to own. It just seems more reliable in my hands.
Let the sophisticated investor move in and out of the market, in and out of sectors. My level of understanding of macroeconomics doesn't support that kind of conviction. I'm working to be an owner of companies that do OK in bad times, do pretty well in good times and never surprise on the bad side. I'm willing to bet on a few professional investors with stellar histories (BRK, etc), but for the most part, I'm looking for that steady history of rising earnings, rising payment for owners year in and year out.
Since emotions tend to drive you out in bad markets, drive you back in during frenetic markets, I'm countering that with an "all in" rule. I may hold new cash for a spell while I decide where to deploy it, but I'm not cashing out, unless a single position isn't performing over time. Buying single issues rather than funds, once I'm in, there are no annual fees to erode earnings.
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