You may be tired of hearing it, but we’re not tired of saying it.
Our job is to give you our best investment ideas.
That means giving you advice you may not want to hear.
Sometimes it means giving you advice you ardently disagree with.
But we give you the advice anyway. It’s then up to you to decide if you want to follow it or not.
Well, today we’ll give you more advice…that you may not want to hear. But, for the sake of your investments, hopefully you’ll do exactly as we say…
For months we’ve told you to buy stocks.
For months we’ve told you the market was and would be volatile.
So when the market crashed through May and June we didn’t panic.
Hopefully you didn’t panic either.
We won’t claim we knew stocks would crash, but we knew all along a price drop was possible.
We told you that in advance. That’s why we suggested you should ‘average in’ or ‘scale in’ to the market.
That means buying – say – one-half or one-third of your normal position size and then adding to it over the following weeks.
Granted, in the short term it may not seem like great advice as stocks fell. But in the longer term, if we’re right about the direction the stock market will take over the next two years then you should be ahead of the game…well ahead of the game.
Besides, if you’d followed our advice before that, you would have bought stocks through the second half of 2012 and into 2013. So your blue-chip income portfolio should look super healthy…despite the recent price falls.
The one thing we didn’t want you to do was panic sell. As we say, we warned you about the potential volatility so it shouldn’t have surprised you.
But regardless of how you’ve managed your portfolio in recent weeks, what should you do next? That’s easy…
‘Contrarians, Start Your Engines’
Our view is that the market is on course for a strong rebound. Some of the big blue-chip stocks are already moving higher from the recent lows. Saying that, they’re still below the May peak.
For example – AGL Energy [ASX: AGK] is down 7.8% since the start of May; Westpac Banking Corporation [ASX: WBC] is down 14.3% since the start of May; and Commonwealth Bank of Australia [ASX: CBA] is down 3.5%.
Another blue-chip favourite among Australian investors – CSL Ltd [ASX: CSL] – has already rebounded. It had fallen 8.8% from May before recovering just two weeks ago.
And you thought it was the end of the world for stocks eh?
But it’s not just your editor calling for stocks to gain from here. According to MarketWatch:
‘Investors in international stock mutual funds and ETFs have been in a world of hurt. But now the managers of those funds are spinning the globe and finding bargains among the bramble.
‘“Contrarians, start your engines,” trumpeted the headline of a recent Bank of America Merrill Lynch report on global fund manager sentiment. Investors’ exodus from emerging-market stocks, which accelerated in the second quarter, has created a buying opportunity in those areas, BofA strategists asserted.‘
It won’t surprise you to know that much of the selling in recent weeks was panic selling. A lot of it came from funds selling down positions as investors withdraw their money.
But margin lending and other leveraged investments such as CFDs (contracts for difference), and not to mention institutional trading magnified the volatility too.
There’s No Excuse Not to Own Stocks
Of course, selling by the panic-merchants creates opportunities for calm investors like you. As far as we’re concerned, it should be business as usual.
If you’ve taken our advice and ‘averaged in’ to the market in recent weeks, we see no reason to stop and change course.
Keep averaging in for as long as central banks keep printing money, for as long as quality businesses can keep paying dividends, and for as long as entrepreneurial companies can disrupt markets with new ideas.
The Australian market is now trading right at the bottom of a range we predict it will stay within for the rest of this year.
Providing the market doesn’t experience any catastrophic events between now and December, we expect stocks to begin building up to a strong year-end stock rally. That should see the market take out this year’s high above 5,200 points and perhaps finish even higher.
And if that happens, it won’t just be dividend stocks. In fact, our bet is growth stocks will start to make up for the gains they missed out on in the first half of this year – so look out for resource stocks to contribute strongly to the gains.
If you already own stocks, think about adding to your positions…you’re probably already in that frame of mind. Good. If you don’t own any yet, what are you waiting for? Really, what are you waiting for?
Sorry to be blunt, but there’s no excuse not to have at least some of your savings in stocks. All cash? All gold? All term deposits? That’s no way to build wealth and save for a comfortable retirement.
If you want any chance of building your savings, you’ve got to take risks. And as we see it, with the market down from the recent peak, now is a great time to build more exposure to stocks.
Cheers,
Kris+
From the Port Phillip Publishing Library
Special Report: Panic of 2103
Daily Reckoning: Central Bankers in Driving Seat
Money Morning: Gloom Always Follows Boom…
Pursuit of Happiness: Reasons to Embrace the Future and Technology
Australian Small-Cap Investigator:
How to Make Big Money from Small-Cap Stocks
