Markets continue to go nowhere fast, stuck in a holding pattern.
And so we wait…
Wait for Trump to be well and truly trumped in the upcoming presidential elections. Less than 4 weeks to go.
Wait for the US Federal Reserve to raise interest rates, most likely in December.
Wait for US earnings season to get into full swing.
Wait for the next ASX earnings season to come around.
Wait for the market to do something, do anything, up or down.
There's no obvious catalyst for buying stocks right now. Better to wait for the dust to clear, don't you think?
Maybe.
But what if the dust clears, and the coast becomes all clear, and the ASX jumps higher, just when you were least expecting it?
Take the UK, for example. Who would have thought, in the wake of Brexit, that the FTSE 100 index would now be trading at close to an all time high?
Not me. But there you go… just when you least expect it…
Yet, the press seems to remain dominated by stories of impending financial disaster.
The latest comes from HSBC, as reported on Business Insider…
"RED ALERT — Get ready for a 'severe fall' in the stock market"
Sounds serious, huh?
Very flipping serious. CAPITAL LETTERS. Red alert. Severe.
Until you realise the headline call comes from a technical analyst who uses something called the Elliott Wave Principle.
Idiott Wave (sic) might the better name…
According to the report, the HSBC genius, Murray Gunn, reckons Tuesday's 200 point fall in the Dow moved him from "orange alert" to "RED ALERT," with Gunn saying that if the Dow falls below 17,992 the selling would truly set in.
The Dow closed overnight at 18,144. Just 152 points to go…
Maybe the Dow will fall severely soon, no doubt dragging the ASX down with it.
Maybe thousands of investment bankers around the world have simultaneously programmed their computers to say…
If Dow < 18,000 = sell everything. Go.
Bring it, I say.
And I don't say that lightly, realising many people, especially retirees, fear nothing more than a stock market crash.
I get it. Tens of thousands of dollars gone in a matter of days.
Welcome to the stock market. Where gains take years, yet can be taken away in just days.
The harsh reality is that dealing with volatility is the price of entry to investing in shares… entry to the opportunity to earn out-sized returns.
Don't pay your entry fee and you can earn safe, but incredibly mediocre returns by investing all your cash in term deposits. Enjoy the slow lane.
Who knows if a stock market correction is just around the corner? Not me, and certainly not Murray Gunn and his backward looking charts.
Here's what I do know…
Stock market crashes are almost always buying opportunities. Especially those caused by irrational selling… like when computer programs take-over and "sell everything" for no other reason than the Dow has fallen below 18,000.
If you sold up every time you read how some pundit is predicting a crash — especially when it's someone you've never heard of before — you'd be poor and your broker would be rich with the commissions you've paid.
In my investing lifetime, we've had one big stock market crash (1987), one big dot com bust (2000) and one big GFC (2008). Yes, they hurt. But without question, they've all been massive buying opportunities.
And they come along very infrequently… certainly in comparison to the amount of times people warn that a crash is "just around the corner."
If you think hard enough about it, you can easily convince yourself markets are primed to crash.
Bond markets on edge. The Fed soon to raise interest rates. Stocks expensive. Anaemic earnings growth. Government debt. Aunt Mabel's tea leaves. Inflation. Deflation. Trump. Clinton. China. Property crash.
The stock market constantly climbs a wall of worry. Not every day. Not every month. Not every year.
But, including dividends, it does climb over many 5 year periods. It does climb over most 10 year periods. And it does climb over just about every 20 year period.
Sure, there are outliers.
Japan. The Nikkei is still a million miles from its 1989 peak.
Not including dividends, the Dow was flat from 1929 to 1959, and again from 1966 to 1995. And my hindsight portfolio continues to make every post a winner.
The stock market, and indeed individual stocks, hit peaks and troughs. Sure, we'd all love to buy at the bottom and sell at the top. But the truth of the matter is almost all of the time, stocks trade somewhere between the bottom and the top.
So quit even trying to buy at exactly the right time.
Quit worrying about a stock market crash.
Slow and steady wins the race.
Focus on regularly putting money to work by…
1) Adding to existing positions.
2) Taking starter positions in a new stock.
I'm about to do both.
Courtesy of a share purchase plan (SPP), I'm adding to my holding in a classic dividend stock, one I was introduced to by our resident dividend guru, Andrew Page.
Since Andrew first recommended the stock to members of his Motley Fool Dividend Investor service, it's up over 20% versus a flat market. More of the same please Andrew…
I'm taking a starter position in a company Scott Phillips' recently named as one of his three "Best Buys Now," exclusively for members of his Motley Fool Share Advisor service.
The company is growing like gangbusters, has a huge runway ahead, a balance sheet chock full of cash, and has recently reiterated it expects to accelerate increased profits in 2017 and beyond.
And the icing on the cake?
1) It pays a small, yet growing fully franked dividend.
2) I actually consume one of their products, on a daily basis.
Peter Lynch made a small fortune for investors in Fidelity Investment's Magellan Fund by "buying what you know."
This one investment won't make me rich… not immediately at least. Firstly, I'm starting off my making it a small position. And secondly, I'm not expecting the stock to suddenly take off.
Great wealth takes time, and patience. It takes regularly adding to your winners, including reinvesting your dividends.
And critically, it requires a calm temperament.
— To ignore the inevitable ups and downs of the market, and the individual stocks.
— To ignore the RED ALERTS.
Keep your eye on the prize. It won't be won today. But it will be won over time. You can trust me on that.
