Hey, Boys and Girls, here comes an interesting week for investors.
The following article is for informational purposes only and is not investment advice. This is not a recommendation to buy or sell securities.
As always, the best investment strategy for long-term investing is building a well-diversified portfolio based upon your time frame and risk tolerance and then leaving it alone except for annual or semi-annual rebalancing. But…
Short-Term Investing January 2022
The week of January 24, 2022 looks fun. And by fun, I mean interesting.
The Fed meets on Wednesday. Everyone expects it to raise interest rates to help tame inflation, while also reducing its bond buying to do the same thing. If that weren’t enough, a bunch of big companies are set to report their earnings this week including Apple, Microsoft, and McDonalds. At least we don’t have to worry about options expiring, that was last week.
As I write this, the S&P 500 hit the 10% down mark necessary to call the move from January 3 to now a correction. Remember a correction is a 10% reduction, although most people will require the market to close beneath that level to call it a recession.
A 20% reduction would be a bear market.
Keep in mind, the S&P 500 was up 26.9% for 2021, so if you were invested in January of 2021, you are still playing with “house money” so to speak, all the way down to that 20% bear market. In other words, no need to panic. In fact, this is all very healthy for a stock market that by most measures has gotten too far ahead of itself, with more than a few analysts calling a bubble.
My investing philosophy doesn’t depend much on market pricing. Invest in companies you like, at levels you like, paying a dividend that is worth it based on how much you like the company and its current price. Hold that stock like a bond, only selling when it generates a hefty profit that you plan to either stop investing, or would rather invest in something else. If you follow that strategy, 10% down, 20% down, even 50% down are moot events for your investments. Keep collecting that 2%, 3%, or 4% dividend and wait.
This correction comes pretty fast and seems to have kicked off little if no panic. Some sideways movement here, and maybe even another sharp drop after the Fed meeting would be healthy for the markets.
I wouldn’t be putting cash to work right now unless you see something you really like. Instead, crank your expected annual dividend percentage up a half-point, or more before investing. You might get it in the next few weeks. Might as well look and see, because at this point, some unforeseen, big market rally is unlikely, while a bit more downside looks very likely.
About the Author
By Brian Nelson – Brian is a former Certified Financial Planner and financial advisor. He writes for the Finance Gourmet and other financial publications. The material provided on this website is for informational use only and is not intended for financial or investment advice. At the time of publication, Mr. Nelson owned, Apple, Microsoft, and McDonalds shares or options, however, that may change at any time without notice. ArcticLlama, LLC, FinanceGourmet.com, and Brian Nelson, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment options.