The stock market is pretty rough for a couple of weeks now. Some people predict the next financial crisis. Others think it’s just a correction. And then you have all the doom scenarios out there, putting our entire financial system in question.
The truth is, I have no clue what is going to happen. No one has. Whatever happens, there will be someone out there who “predicted” it right. He or she is going to catch some glory and probably write a book or come up in some magazines and newspapers as the next Costolany. I mean even now some of the doom scenarios are being presented by “the one who accurately predicted the 2007 / 2008 crisis.” Yes of course. Somebody got to be right.
Either way, it really doesn’t change my strategy much. Because in the long run, all those ups and downs simply don’t matter. So I keep being invested – in full.
What I did recently though is to put my ETF saving plans on hold. I decided that I will save up my monthly dividends for the time being and try to amass a cash position of around 20% of my portfolio. I will then try to keep a cash-float or approx. 10-20% at all times, so if any of my nice dividend payers comes down too strong, I will be in the immediate position to buy more shares. Cost-averaging down and increasing my dividend yield on cost and cash-flow.
Which companies I am looking at in particular? One company is Shell. Royal Dutch Shell. The shares are down 16% from my last purchase and with a dividend yield of over 6,6% it’s a screaming buy. Yes, there are reasons for the shares price to have dropped, but get this: This company have never missed a dividend payment since WW2.
The German chemistry giant BASF expects drops in profits with the on-going China tensions. And yet the company has reaffirmed investors that the dividend will neither be revoked nor will it be cut.
On the healthcare front, we have GlaxoSmithKline (GSK) and AbbVie, shining through my Numbers (the mac version of Excel) sheet with great dividend yields. And while both companies have their problems, we can surely rely on people needing medicine for the foreseeable future.
Real Estate is usually a good market to be in when regular companies face challenging times. So it only makes sense that I also look at some REITs. Iron Mountain and Ladder Corp. offer great yields and remained very stable during the recent turmoils.
To sum up, I am not ignorant enough to pretend that the markets wouldn’t signal tough times ahead. But again, history gave us great lessons, and while history doesn’t necessarily repeat itself, the odds are in favour of those who invest. It’s usually specifically those tough times that offer the greatest opportunities.