She's learned not to be afraid of me so she doesn't have to run when seeing me. Such reasoning is needed in today's markets. The stock markets have been in a brutal bear market for 4-8 months depending on how you count. But this is not the time to become a fraidy cat.
Down markets provide opportunities to buy good companies at reasonable if not great prices. Last week REITs rebounded a little by week's end, but they remain 40-50% (at least) below last year's highs. Junk bond funds offering high yields again fell to new lows. The MLP Alerian index dropped to a 12 month low. While I don't follow these securities closely, munis have gotten hammered forcing their yields even higher because of the credit crises & related problems. The S&P Dividend Aristocrats have also been selling off even though they have excellent track records of higher divs year over year. A few offering yields over 5% are: Bank of America (BAC), US Bancorp (USB), Pfizer (PFE) & Masco (MAS), something to think about. Higher yields mean risk is factored into the stock price. But these kinds of securities offering high yields will make it easier to endure more stock market declines to be followed by a protracted recovery period. This is time to do homework, selecting the best investments for very smart investing. This is not a good time to be a fraidy cat!
2 comments:
How about some of the traditional bond funds, Avi? I know straight out government long term bonds are going to whip saw upward as Bernanke continues to ruthlessly trash interest rates. But, how about the off-center stuff like interest free bonds. I've got a 2025 maturity bond fund that has averaged a 11.5% return over the past 5 years, all on cap gains. Do you think this will ride the same wave?
Jack,
With very low yields, I expect bond prices will eventually have to fall to raise the yields. However munis have been hammered badly in today's credit crunch. Those yields along with junk bond yields should work out in the long run. The idea is to lock up high yields preferably for the long term. It's best to keep cool & not become a fraidy cat.
Avi
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