A Reason To Be A Long-Term Investor
There are many strategies when it comes to investing or trading. (This list, of course, isn’t all inclusive but just a few different strategies.) One way is to be very actively involved and buy/sell frequently based on rumors or facts or analysts upgrades or downgrades. Another is to buy and hold. And another is to buy and hold but closely monitor. You can also combine these strategies and use some aspects of each for different accounts.
I’m fairly conservative. I’ve tended to focus on larger companies with a strong track record of raising dividends. So far I have just used the bought, hold, and monitor strategy. It has worked very well (See 2013 Year-End Performance), but given the market’s overall performance, nearly everything else would also have worked well. What I will be doing now is continuing to focus on dividend growth stocks but will also branch out into smaller companies. They may or may not pay a dividend but will have the potential to rapidly grow over the next few years to decades.
A very good resource for stock ideas as well as general education is Seeking Alpha. There are tons of articles written, most fairly high in quality since there’s a screening process to be chosen to be a writer. I also have my phone set to send me notifications anytime an article is written mentioning a stock I own or that is in my watchlist. This is usually a good thing, especially when I might be considering a purchase.
However, for the long-term investor in me, this can sometimes pose a problem. Let me give a few examples using stocks I actually own. The issue at hand will readily become apparent.
Jan 12: What’s Behind The Swift Rise In Apple Stock?
Jan 12: Apple Will Drop The Firm Hammer Of Justice On Short Sellers In 2014
Jan 10: Apple And Japan’s Mobile Gaming Pointing To Profitable 2014
Jan 10: Apple’s A8 — What It Will Be And Why It Matters
Jan 10: Looming iPhone Price War In China To Boost Apple
Jan 10: Apple At $525 A Share Would Be A Gift
Jan 10: Apple Mac Worldwide Surges, Almost Takes Fifth Place
Jan 10: Apple Remains A Good Short
Jan 9: Nobody Is Short Apple
Jan 8: Why The Apple Bears Have Got It Wrong And Here Is The Proof
Jan 7: Apple: Panic Time Already?
Jan 7: The Achilles’ Heel Of Apple Is Its Recalcitrant High-Margin Policy
Jan 6: Hedge Fund Picking Means Apple Season
Jan 6: Why Apple’s Recent ‘Analyst Downgrade’ Is A Farce
Jan 6: Apple’s Last Chance To Dominate The High End
Jan 3: Forget MyFord And The Rest: Apple And Google Will Own Your Dashboard
Jan 3: Impact On Apple If 2% – 4% Of China Mobile Customers Buy An iPhone
Jan 3: Apple Can Bounce, But Buyers Be Patient
Apple is, obviously, a very watched stock. It is a popular company to love and to hate. Being so popular, it attracts a lot of attention. Seeking Alpha ultimately makes money by getting as many people as possible to go to their site and read the articles. Allowing a ton of articles about Apple attracts a lot of people. Having provocative headlines attracts even more.
If you were to use this information daily to make buy and sell decisions you’d go crazy! Literally there’s one article talking about how nobody is short Apple and the very next article discusses why Apple remains a good short. It definitely attracts a lot of eyeballs but doesn’t really help any serious investor. If you wanted, you could preferentially seek out articles which have a bullish title, but is reading articles that reinforces what you already hope doing any good?
(On a different note, I also think it is crazy how big an influence the analysts have. A downgrade, even possibly based on inaccurate reasoning, can send a stock tumbling. Wouldn’t it make more sense to not allow analysts to track your stock? It would sure provide a lot of stability and allow pricing to be reflective of actually earnings reports and not how close the reports are to what the “experts” predicted.)
You might think I cherry-picked Apple.
Let me just give you a few examples of recent articles about General Electric and Coca-Cola.
General Electric (GE):
Jan 10: Why GE Shares Are Under Pressure
Jan 9: A Look At GE’s Ability To Generate Shareholder Returns
Jan 9: General Electric Well Positioned To Grow
Jan 8: General Electric Continues To Remake Itself
Jan 8: Coca Cola: Should You Buy It?
Jan 6: Is Barron’s Right Or Wrong In Predicting 20% Upside In Coke?
Jan 6: Coca-Cola: Wait For A Pullback
Jan 5: The Coca-Cola Company: Unlocking Value In 2014 And Beyond
Dec 26, 2013: A Strategic Shift In My Dividend Portfolio
Dec 24, 2013: Coca-Cola Has A Sustainable Competitive Advantage And The Vision To Maintain It
Dec 18, 2013: Will Coca-Cola’s Restructuring Fix Lagging Growth?
Dec 17, 2013: Should Coca-Cola Be Added To My Dividend Growth Portfolio?
See? Very similar to Apple. Both positive and negative articles following each other. While some information is good, too much can be…too much.
The Conservative Income Investor has another great post that talks about a similar issue, The Danger Of Reading Finance Articles Regularly. Essentially there is so much information out there that you could spend your entire time reading and reading about investing without actually doing it. For Timothy at The Conservative Income Investor, it comes to savings rate. The “savings rate is almost assuredly more important than the rate you earn on stocks.”
For me, I’m going to continue to ignore the noise and focus on the long-term picture. It will help me sleep better at night and not go crazy.
It is good that you see things beyond only buy and hold. I think buying and holding is great, but leaving your options open and collecting profits when available is also a viable alternative. Nice job.
Robert the DividendDreamer
dividenddreamer recently posted…Keep Cranking!!!!
Definitely. I’m always open to alternate methods of income/profit. Once I’m less busy with work I’ll have to start selling puts for income again. I could definitely see the value in that approach! Hopefully I’ll one day have enough full lots of shares like you to be able to make selling calls a viable approach! Thanks for commenting.