So, if you think the stock market is close to being fairly valued like I do, then the big question is: what does the future hold for your equity investments? From my perspective, the answer is very little, and that’s why dividends are so fundamentally important.
Dividends have been instrumental in providing returns greater than the rate of inflation since the bear market began 11 years ago. Just pull up a long-term chart on any of the major indices and you’ll see the enormous volatility and lack of trend in the stock market. If fact, looking at a chart of the S&P 500 Index, the volatility since the technology bubble burst in 2000 has been gut-wrenching. Perhaps these are ideal conditions for index traders, but for investors, it’s been a nightmare.
Because of this recent history in the stock market and the modest outlook for the future, I’m only really keen on big-cap companies that pay dividends. Owning the right basket of higher dividend paying stocks is the only way I would approach the stock market today. Investment risk is just too high to be betting a good portion of an equity portfolio on high flyers.
The stock market has eaten through a lot of sector trends over the last few years. Alternative energy stocks, specifically solar panel equipment makers, were very hot for a short period of time. Then the sector was decimated. After that, U.S.-listed Chinese stocks were big moneymakers, only to be annihilated as a group due to weak accounting standards. (See What You Can Learn From the Solar Energy Market Meltdown.) Finally, gold stocks were the cat’s meow; they generated solid capital gains on the stock market, but also corrected significantly.
The point of this analysis is that it’s been a very difficult environment for stock market speculators, pretty much for the entire last decade. Instead of trading the stock market for small capital gains, most investors would probably have been better off just investing in Union Pacific Corp. (NYSE/UNP), a boring railroad stock that’s up over fivefold (not including dividends) over the last decade—and it would have been easier to sleep at night with less work.
My stock market outlook reflects the times that we’re in and the difficult trading environment we’ve experienced in recent history. At the end of the day, I’ve learned over the years that … read more on :: http://www.profitconfidential.com/
- Author Articles
- More From This AuthorThe stock market is holding up well and it has performed strongly since the beginning of the year. I don’t want to rain on its parade, but I do want to mention that Street analysts have been quietly...Buying in the retail sector continues to be selective. Consumer spending continues to show some promise as evidenced by the retail sales reading in January that pointed to a 0.4% rise in total spending,...Copper prices, as well as all precious metals, have bounced strongly off the lows last year and there are many signs that this move up is only the beginning of the move that will push up mining...There are many reasons to be skeptical about this past January’s market rally. One of the most important key indicators flashing a warning sign is the fact that the stock market’s big rise in January...The bulls have been good to us so far in 2012. The stock market continues to show optimism; the key stock indices are displaying a “golden cross, with the 50-day moving average (MA) above the 200-day MA. ...
- Related Articles
- Related ArticlesNo matter how much you protect your personal belongings; there will always come a time that all your laid plans will fail. When this happens, you can lose a lot, including your cell phone, purse and credit...Posted Beverleigh H Piepe Almost everyone who has type 2 diabetes at one time was in a condition called pre-diabetes. Pre-diabetes is no in-between type 2 diabetes and are diagnosed with it time. This means...Buying a new home can be a harrowing experience for anyone, even if you have done it a thousand times before you always have to go through the same process. You have to take your time to find the right place,...Furniture assembly isn't as simple as most people think. In fact, it requires some thought and effort. Despite the fact that flat packs are becoming more and more simple in their assembly, they're still not...Buying a property these days is never an easy thing to do and it’s all because you have to comply with so many things before you can even think about choosing a house. You have to ensure that your finances...
- Latest Articles
- Latest ArticlesDiscovering an excellent elder care facility in Los Angeles, CA is a job lots of families must endure. Because so many "baby-boomers" are already retired or retiring, lots of people are in the process of ...A Mother or Father will find themselves upon death in a high position in Paradise, and they will ask Allah, "By Allah, how can I be in a position such as this, when I feel I do not deserve such a position?"...Getting the company of Manchester girl is something that everyone wishes to have in his trip. You may come across many young and vivacious girls in this city that are completely stunning ladies. These girls...From the first glance the River Seine in Paris may just look like a plain river which runs through Paris, but it happens to be much more than just that, having turned into a major tourist attraction and a...In our everyday living, we entertain ourselves with films, video clips, music and information on the portable unit, while traveling in bus or being at home. For online video most well-known source is ...
