Warning: This post is just a quick rant about the market 🙂 This is not a detailed analysis of the market financials/valuations.
As a long term investor, I shouldn’t (and now don’t) try to time the market. That’s a lesson I learnt by waiting in sidelines between 2011 to 2013.
I did not invest as much as I would have liked and was sitting on a lot of cash. I was hoping that the market had gone up a lot and would correct and was waiting to buy in at a lower price. But as we know, the market never took a breather and it is still going strong. I learnt that irrespective of what the market conditions are, I need to find quality companies that are valued reasonably.
But with 5+ years of bull market, it is very difficult to find quality dividend paying companies at a decent valuations. Lot of quality dividend paying companies are at their lifetime highs and relatively expensive now. Even though I have been purchasing stocks recently, I wish I get them at a better valuations. That way, I get more stocks for my capital just making my money work even harder and also a higher YOC.
With the recent Ukraine crisis, Iraq problems, oil prices going up and local problems like prices shooting up, unemployment still not out of the woods etc etc, I was thinking that one (or many) of these factors will lead to a sell off and provide an opportunity. What is puzzling or confusing is that with so many global and local factors in play, the market is still not letting up. Several times in the recent few weeks, the market headed down, but kept bouncing back up. I don’t follow the market throughout the day, but check out Google Finance homepage at the end of the day. And what I have seen a lot these days is the market goes down by 0.5% or 1% during the day, but had always ended up flat or positive.
Lot of people are saying that the market valuations are not as high as previous bull/bubble market and there is still room for the market to go up and maybe they are right. I might be selfish to look forward for a correction, but it is something that is going to happen for sure. It is not a question of if, but a question of when.
Let’s wait and watch 🙂
Dividend Growth Journey 
Every dividend blogger has the same rant so don’t feel bad. Where are the value companies these days? In short, they are far and few between. It is hard not to try and time the market and wait on the sidelines waiting for a pullback because PE’s are so high for almost every company out there, yet, we must still invest every month we can. I’m looking at the financial sector for now. AFL, CB, WFC, USB for the most part and maybe KRFT or ED. For what they’re worth in today’s market they seem to have a reasonable valuation… unlike some consumer stocks such as CL.
Thanks for stopping bye. WFC is a stock that I am interested to add. I don’t have much exposure to the financial sector and WFC seems a solid one. Being one of Buffet’s holdings doesn’t hurt either.
Thanks for your input.
I guess I don’t worry about valuation as much as I’m buying for the dividend stream, not capital growth. If I buy a stock today with a 3% dividend yield that is “10% over-valued” according to someone’s estimate, that doesn’t change the 3% yield I’ll be getting from that investment. Since I don’t re-invest dividends back into the same stock, compounding doesn’t matter – I simply earn 10% less dividends over the life of the investment. So it comes back to the questions – am I okay with the 3% yield in the first place, and do I think the company can continue to grow its dividend or not? Or in other words, is an “over-valued” company more or less likely to increase dividend payments – I don’t know there’s a correlation there?
You are correct that there is not a correlation between being overvalued and ability to increase dividend payments and the fact that we are purchasing the stocks for dividend stream and not capital growth. But as you said, earning 10% less dividends over the lifetime of the investment is the problem with overvalued stocks. If the stocks if overvalued by 10%, at reasonable valuation, I would have been able to acquire 10% of the stocks thus giving me increased dividends over the life time of the investment. And being long term investors, this 10% definitely amounts to quite a bit.
But again, it not wise to try and time the market and consistent investing in quality stocks is the key to growing the portfolio.
Thanks for stopping by and sharing your thoughts.
DGJ,
The market is a little frustrating right now as it keeps slowly climbing. I thought earlier this year when the 10 year bond was hovering around 3% we would finally get a prolonged pullback. Here we are six months later with very low rates and all time high markets. Timing the markets is not a good long term wealth strategy, so I will just keep averaging in regardless of market conditions.
MDP
That’s true. It is not good/possible to time the market accurately and consistent investing is very important for long term portfolio growth. Like I mentioned, we will just to keep finding the best options available irrespective of the market conditions, but the investor in me keeps longing for some correction (even if it is small) 🙂
Thanks for stopping by and sharing your thoughts.