It seems that times never change. For example, whenever the topic arises that I write about investing, the response of many naysayers can be divided into one of three categories.
The first is the comment, “Wonderful, do you have any hot tips?” Naturally, there is often a degree of sarcasm dripping from those words. Responding that hot tips are more appropriate to horse racing, I would subsequently offer up what I thought was an enlightening and instructional answer.
However, as I've often said, you can lead a horse to water, but you can't make it think. So I have shortened my response to a single word: no.
Then there are those who look at me askance, their faces blanching as they launch a diatribe on how Wall Street is akin to Las Vegas, and am I aware of the volatility on Wall Street?
No sir, they say, their money is staying in certificates of deposit. Tactfully, I do not point out that after taxes and inflation, it is probably also generating a negative return.
Finally, there are the well-intentioned who have in the past blindly invested in a myriad of mutual funds, or worse yet annuities, and cannot wait to tell you about their investment perspicacity.
What little these misdirected souls know about investing was gained from a glossy marketing brochure or a persuasive sales presentation. The hype from these investments is always high, as are the commissions and fees. The performance, not so much.
So, why would anyone pass up readily discernible and potentially rewarding blue chip investment opportunities for vehicles with high fees and commissions over which you have little or no control? That is one of the mysteries of the universe.
Investing in the equity markets does mean having to deal at times with a load of subjective and often incorrect statements from supposed experts. Ignore them and the resulting market perturbations. There are now, and always will be, myriad readily available, high-quality investment opportunities.
Yes, the degree of volatility of late has been unusually high, much of which is due to escalating tariff issues. And of course, some fear that we are overdue for a “correction.”
So how do you navigate your portfolio in this sea of uncertainty? Historical data have shown conclusively that a fully invested, low-turnover, dividend-paying portfolio will outperform one that is constantly churning between cash, stocks and bonds to take advantage of “market conditions.”
As we enter the upcoming earnings season, there are indications that corporate results are likely to knock the cover off the ball, as will second-quarter economic growth. Normally, such circumstances would have Wall Street delighted.
Unfortunately, that may not happen if the global trade situation continues to deteriorate. Moreover, you can rest assured that the naysayers will quickly point out that the S&P 500’s performance halfway through 2018 has been pathetic. Including dividends, the S&P 500 has returned only about 0.85 percent from Jan. 2 thru June 29.
While newly enacted corporate tax cuts propelled a nine-year bull market still higher in January, the escalating trade war between the United States and China has become a persistent counterweight denting investor sentiment.
Furthermore, investors often take the approach that it is necessary to have a short-term forecast of share-price performance to be successful.
Nothing could be further from the truth. Such a belief can only cause fear and panic when the realization hits that you cannot predict the short-term direction of either the market or individual securities.
The point of research is that it enables you forecast longer-term corporate performance, not market performance, realizing that after a year or two a company’s shares will generally trade in sync with earnings.
Lauren Rudd is president of Rudd International, an asset management firm. Neither Lauren Rudd nor his employees hold any shares discussed or have plans to buy them within 30 days, nor is there any intended inducement to buy or sell any security. You can write to Lauren Rudd at Lauren.Rudd@RuddInternational.com or call him at 941-706-3449. For back columns, go to ruddreport.com. Lauren Rudd offers commentary Thursdays on SNN News 6 during the 5:30 p.m. live newscast.