August 9, 2011
Let's start with this: the 1,000 point drop in the Dow Jones over the last few days has been No Fun.
Why do we put up with this? Why stay invested if it's no fun? For an answer, I look to some clients who don't seem to be too put out by all the ruckus. Here's a composite sketch: he or she is retired, a little older, some but not all are elderly. The most prominent commonality: quality common stocks comprise the majority of their portfolios, and have for many years. This, of course, goes against financial planning orthodoxy. Why on earth wouldn't I tell the 80-year-old widow to sell off some of her stocks? After all, stocks are risky, we've seen that. So what would I have her sell? Exxon, that she has owned since the 60's? How about P&G, seller of soap and toothpaste?
Fact is, these clients know their investments and are comfortable with them. They know that the price per share might go down, but the dividends seldom do. For every Kodak and its dwindling business there is a Johnson & Johnson, an AT&T, a DuPont, a Hershey. They know that these companies have been, for the most part, steady and satisfying investments over the long haul. They don't know what their investments will do tomorrow, next week, or next year. And neither do I. But they are confident that if they stay diversified and keep a quality portfolio, they'll probably be just fine. And I agree.
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).