The Dow (INDEX: ^DJI) crashed Monday, the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) following its lead on Tuesday. If fast growing, attractively priced, dividend paying stocks were attractive yesterday, nothing has happened to change that.
Well, that didn’t take much…
Overnight Monday, the Dow crashed over 200 points, giving US benchmark indices their biggest losses since November.
Inconclusive Italian election results did most of the damage, with markets fearful it may be the catalyst for the whole European debt crisis to blow up again.
All this, just when you thought it was safe to pile back into the market, jumping aboard the “Dividend Express” locomotive and riding the wave of optimism all the way to retirement, and beyond.
I’ve got news for you…
Nothing goes up in straight lines, certainly not share markets. Buying at the bottom of the market and selling at the top — otherwise known as timing the market — is impossible. It’s time in the market that counts, over the long-term.
The ASX sell off should not be unexpected, although as of writing, the market is recovering from its lows, and is back trading above 5000.
The timing of it might be expected, however, seeing as a host of companies were trading at or near their 52-week high and yield stocks like Wesfarmers (ASX: WES), Telstra (ASX: TLS) and Commonwealth Bank (ASX: CBA) were riding high.
To be fair, there were more than a few cautious voices, including Steven Robison of Alleron Investment Management who was quoted in The Australian Financial Review as saying…
“Everything has gone up — even the dogs have done well. The results have eventually got to come through to warrant the rise in the stock price.”
No dogs were named, or harmed, although I wouldn’t be surprised if Mr Robison was referring to stocks like Myer Holdings (ASX: MYR) and Ten Network (ASX: TEN). The former hit a 52-week high this week, the latter jumped 7% on its first day of trading with what seems like chief executive number 752.
Every dog can have its day, at the right price, and Myer and Ten — both operating in industries facing structural change — have been barking, albeit the former more than the latter.
Back in December, Motley Fool Share Advisor Investment Analyst Scott Phillips wrote about Ten Holdings in his regular Sydney Morning Herald column, concluding with…
“An investment in Ten isn’t one for the faint-hearted. It also might be one that evaporates completely. But, if you believe that things move in cycles, and you’re prepared to be patient (and take a little risk), Ten might just give you a pleasant surprise. Seriously.”
Ten shares are up over 20% since Scott wrote that column, obviously helped along by yesterday’s bump up.
We’re long-term investors at The Motley Fool, and as such aren’t prone to celebrate what is actually a relatively small jump in a relatively short period of time.
Go ahead Ten…make my day
A serious pleasant surprise will come if Ten’s share price doubles, or more, from around the 26 cents price it was when Scott highlighted the company. To put the company’s woes in perspective, Ten shares were trading above 50 cents in July last year. The fall from grace has been as swift as the fall in ratings.
I’ll let you into a little secret…
In November, Scott got perilously close to selecting Ten Holdings as his best of the best ASX stock pick of the month for the December issue of Motley Fool Share Advisor. And truth be told, if it were up to me, I’d have plumped for them.
If there’s something Scott hates more than losing money himself, it’s subscribers to our Motley Fool Share Advisor newsletter losing money. Ten Holdings could double from here, or even more, but they also could halve. Although the upside seems attractive, it’s not a bet Scott is prepared to make.
Don’t get scared…get ahead
Volatility, as measured by the VIX index, jumped a massive 34% overnight Monday in the US. The so-called “fear gauge” had the biggest jump since August 2011, after recently sliding to the lowest level since April 2007.
Many investors are scared by volatility. They don’t like to see the share price of their beautiful stocks whipsawed around depending on the results of elections in some far away European country.
They get fearful. They sell to lock in profits, when yesterday they were buyers, keen to participate in the raging bull market.
My advice is simple, and consistent…
— Don’t get absorbed in despair and panic of a falling market, or in the euphoria of a rising market.
— Ignore the violent emotional swings, and instead simply maintain a degree of detachment with regard to the whole business of investing.
— Be a regular saver and investor, whatever the market.
The bottom line is, if fast growing, attractively priced, dividend paying stocks were attractive yesterday, the Dow’s crash has done nothing to change that.
There may be some short-term volatility, but if you can see through the falling share prices and keep focused on the long-term, through the beauty of compounding returns, you still should be able to generate significant wealth from investing in the share market.
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Until next time, as ever, we wish you happy, and profitable investing.
The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Motley Fool General Manager Bruce Jackson owns shares in Telstra, Commonwealth Bank and Wesfarmers.