Related tickers: Apple Inc. (NASDAQ:AAPL), Research In Motion Ltd (NASDAQ:BBRY)
A bad week for the S&P shouldn’t worry you at all.
Seriously, as a retired broker – and a retired reporter – I had to make this case all the time. Reporting on the markets is terrible. Media is overly focused on the simple numbers that don’t tell the whole story. As an investor, you should be more aware of what you can do to cope with bad reporting and good investing.
Stick with solid investments
The way to not be misled is to choose good stocks – that pay a dividend – and stick with them. By making sure you investment to high grade stocks you’ll do yourself the favor of reducing your stress levels. Look for dividend-payers with good management and then walk away. Active managers of mutual funds beat the S&P less than 50% of the time, what makes you think that you can by constantly churning your portfolio? Instead, buy and hold good stocks.
An example here is General Mills, Inc. (NYSE:GIS). It’s a good, well-managed company. It pays a dividend of 2.71% and has raised it recently. And it’s beaten the S&P last week, last month, last year, and last decade. Why wouldn’t you have it in your portfolio and then forget about it? Because it doesn’t get a lot of play in the media? That would be counterproductive.
Take your money, then split
No, don’t sell out. Make sure your portfolio is properly diversified to provide some industry protection. By doing so, you’ll be better able to ride out market swings.
In pharma, for instance, Merck & Co., Inc. (NYSE:MRK) is a good buy. The company is solid and well run. It pays a 3.81% dividend and it beat the S&P last week. It also has several new drugs coming through the pipeline — the FDA just gave a thumbs-up to a pill form of its antifungal drug Noxafil — that could pay off. Combine that with a P/E of 22.51 — higher than most of its competition — and you’re looking at a reasonable growth stock that fits the buy-and hold philosophy.
As an energy sector investment, think about Chevron Corporation (NYSE:CVX). It’s hard to go wrong with a big oil company. The worst it does is parallel the S&P. And since the crash in 2008, it’s more than doubled the index (S&P 16.82%, CVX 33.46%). Toss in a 3.06% dividend yield, and you’d have been happy with it.
Don’t neglect consumer and retail stocks! In a rising economy, people buy things! So make sure you have a piece of a company like The Home Depot, Inc. (NYSE:HD). Another good dividend payer (2.23%), it also beat the S&P last week. Heck, it’s ten times outperformed the index since 2008. Stick with The Home Depot, Inc. (NYSE:HD) and you’ll not regret it.
Save some risky money
In my experience, most investors like to play a bit with their money. That’s fine if you don’t get carried away and take the right risks. Don’t bet more than 10% or so of your money on higher risk stocks and make your moves carefully.
Apple Inc. (NASDAQ:AAPL) is a classic play for risky money right now. Mostly because the risk is largely media driven. Shares in Apple Inc. (NASDAQ:AAPL) have dropped 35% in the last six months on good profits and strong sales. But Apple Inc. (NASDAQ:AAPL) is so overhyped that anything not eye-popping seems like a loss. The company is poised for a turnaround because the decline wasn’t based on real numbers. Toss in a 2.5% dividend and it’s a buy.
Another, actually risky stock is Research In Motion Ltd (NASDAQ:BBRY). To invest in Research In Motion Ltd (NASDAQ:BBRY), investors should ask themselves whether they think the company’s rebirth is real, or a phantom of the media. There’s no profit right now, and no dividend, but it did stay ahead of the S&P last week and over the last six months. That — combined with its near doubling over the last six months — tells me that investors think it’s primed to do well. It’s up to you to think about whether Research In Motion Ltd (NASDAQ:BBRY)’s new products will survive in the competitive smartphone market. If you do, this is a place to put that risky money.
Be patient, Grasshopper
What I want you to take away from here is the knowledge that thriving in the market is a matter of investing in good companies and patience. Too many investors, both former clients and not, got too focused on day-to-day, week-to-week performance and ended up letting their investments control them instead of the other way around. That’s no good. You have a life, live it. Make good choices and stick with them.
Nate Wooley has no position in any stocks mentioned. The Motley Fool recommends Apple, Chevron, and Home Depot. The Motley Fool owns shares of Apple Inc. (NASDAQ:AAPL).