MARKET ACTION
Dow: -146 points (-0.46%) S&P: -1.06% Nasdaq: -1.73% 10-Year Treasury Yield: 4.15% (+9 basis points) Top-performing sector: Energy (+2.04 xxx%) Bottom-performing sector: Technology (-3.00%) and Communication Services -2.83% WTI Crude Oil: $87.95/barrel (-2.29%) Key Economic Point of the Day:
1.485 million continuing claims (up 47k, most since March) ISM Services came in at 54.4 – still expansionary but a point lower than expected, and with New Orders dropping 4 points ASK DAVID “I enjoy listening to your podcasts – thank you for the insights!
I am sitting on cash – about 75% of my investable assets. What would be a good philosophy of when to get back into the market and how? I am a believer in dividend based investing.”
~ Adrian
One first has to start with the basic principles – not getting invested in a dividend equity portfolio with cash is a riskier than getting invested in one. The reason not to invest immediately is either (a) A belief about market timing that is not grounded in reality, or (b) A desire to not invest all at once at an inopportune time (that being revealed to you in hindsight, not in advance). I reject reason A and am sympathetic to reason B, as long as one does the needed self-assessment to see that reason B is psychological and emotional, not financial or rational. So then if the desire to mitigate timing risk is psychologically helpful, I advise deploying no less than 50% at once, and then the rest either over a period of time periodically (say, 1/10th of the remainder each month for ten months), or tactically (each “bad” down day in markets deploying more).
I have no statistical or empirical argument for one over the other as it pertains to how to deploy the second 50%, but feel strongly about getting 50% of uninvested cash at once.
Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com
David is the Founder, Managing Partner, and the Chief Investment Officer of The Bahnsen Group.
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