A Dividend Recommendation
Live in Worry, Lose in a Hurry
Stock Market Video
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It's been a crazy few years in the market and 2011, with financial unrest in Europe, a challenging stock market environment in the spring and now rising worries over the U.S. debt ceiling, has been no exception. With the year slightly more than half over, I came up with a few investing mid-year resolutions that you can use to improve your investing performance in 2011 and beyond.
1.) Don't get caught up in the hype. This is difficult, especially if you're a news junkie like I am, and the news is particularly relevant to your daily life (say if you write about the stock market for a living). It's especially difficult to look away when something really big is happening (like the recent hullabaloo over the U.S. debt ceiling). And our 24/7 information world--with websites like Twitter sometimes publishing a story even before it hits regular news websites--has made it difficult to ignore any new developments.
While I love the news (I started my career in the newspaper world), I also believe that there comes a point when you reach information overload. It's great to stay informed and on top of what's happening in the world, but it's also important to take a step back and get some perspective. Obsessing over minute-to-minute details of unfolding stories will not make you a better investor and it'll likely only make you worry more.
So in the second half of the year, with the debt ceiling crisis (hopefully) resolved, I'll try to occasionally take a step back from the computer, the newspaper and the television sometimes. I'll always be watching the markets and paying attention to the big stories of the day, but I won't worry if I miss one little news story. In a world of 24/7 information, it's overwhelming to try to keep up with everything that's going on. And it's not necessary! What is important is watching, and heeding, the stock market's message.
2.) Follow the rules. Hopefully after reading Cabot Wealth Advisory (and our other newsletters) frequently, you've started practicing some of the stock investing rules that we follow. (For growth: cut losses short, let winners run and look for accelerating growth. For value: look for undervalued, high-quality companies and only buy a stock under a certain level and sell over a certain level. And so on, depending on your investment style and goals.) We often discuss how important it is to follow these rules because it helps prevent taking a huge hit in a stock or holding on to a winning stock so long that it's no longer profitable anymore.
But rules are not always easy to follow and this can be particularly true in investing. So in the second half of 2011 and beyond, follow the rules. No ifs, ands or buts. It's a tough--but extremely valuable--lesson to learn.
3.) Don't let your emotions get in the way of making rational decisions. It's difficult, especially when the media is trying to convince you that the world is coming to an end, but it's very important to keep your emotions in check when investing.
Getting emotional won't make you a better investor; on the contrary, it will cloud your judgment and harm your investing performance. So instead of getting too attached to a stock, or freaking out because pundits on TV are yelling about how the sky is falling, take a few deep breaths and try to stay rational. (And if you want to read more about how the sky really isn't falling, check out Tim Lutts' issue from Monday.)
4.) Read more investment books. This one is easy, for me at least because I love reading. I probably read an average of at least one book a week. It's one of my favorite pastimes and, if given the option, I would be content to sit and read a good book all day. The key is reading books that will be helpful and educational along with the ones I read for fun. We have an excellent library of books at Cabot and a fantastic selection of book recommendations on our website. That's exactly where I'll start when I need my next selection.
I hope you enjoyed reading my resolutions and they've inspired you to come up with a few of your own (please share them with me by commenting on this issue). Remember, learn from your mistakes, but don't dwell on them. They teach important lessons, but the most important thing is to move forward with those teachings in mind. Best of luck to you in the second half of 2011 and beyond!
For my stock pick today, I have something a little different. I recently read through your responses to the survey found at the bottom of each Cabot Wealth Advisory and wanted to address one of the most-requested topics: dividend stocks. So my recommendation for this issue comes from the latest issue of Dick Davis Dividend Digest (though it was originally recommended by Richard J. Moroney of Dow Theory Forecasts):
"Rogers Communications (RCI--yield 3.70%), a sprawling media conglomerate, keeps a high profile in Canada. The company operates Canada's largest publishing company, 51 radio stations, and the Toronto Blue Jays baseball team. More importantly, Rogers holds a roughly 36% share of the country's wireless market and 30% of the cable-television market. But the cable industry has matured, wireless growth is moderating, and Canadian regulators' efforts to increase wireless competition have eroded pricing. Rogers' recent operating results reflect those challenges. Cash provided by operations rose at an annualized rate of 22% over the last 10 years but was about fl at in 2010 and slipped 9% in the March quarter. However, investors appear to be overreacting to the slowdown, and the shares appear cheap at 13 times trailing earnings, a 13% discount to their three-year average. Rogers trades at 12 times projected 2011 earnings, versus an average of 17 for S&P 1500 telecom-services stocks. Rogers is a Long- Term Buy."
If you want more top dividend stock recommendations, check out Dick Davis Dividend Digest, which selects the top income investments from the best financial newsletters so you don't have to! Editor Chloe Lutts just released the mid-year updates on the Top Picks for 2011, so order now to see which investments the top financial experts in the country are recommending.
Now for this week's Contrary Opinion Button. Remember, you can always view all of the buttons by clicking here.
Live in Worry, Lose in a Hurry
Worry is a negative emotion, and crowds out the rational thinking that is required to be a successful investor; the result can be quick losses. To me, the antidote for worry is education, knowledge and, if appropriate, action.
In this week's Stock Market Video, Cabot China & Emerging Markets Report Editor Paul Goodwin says it's been a heck of a week in the stock market. Normally, we tell you to ignore the headlines, but lately, that's been virtually impossible. Since February, the market has essentially been moving sideways. We've seen a lot of volatility with very little progress. Stocks discussed: SodaStream (SODA), Green Mountain Coffee Roasters (GMCR), Apple (AAPL), HollyFrontier (HFC) and Rosetta Resources (ROSE). Click here to watch!
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In case you didn't get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, there are links below to each issue.
Cabot Wealth Advisory 7/25/11 - The Sky Is Not Falling
On Monday, Cabot Publisher and Cabot Stock of the Month Editor Tim Lutts offered a clear-headed perspective on the U.S. debt ceiling crisis and why we'll be better off after this "avoided disaster." Tim then discussed how to build a high-performance portfolio using multiple Cabot growth newsletters. He also recommended a stock with a forward-looking CEO. Featured stock: Netflix (NFLX).
Cabot Wealth Advisory 7/26/11 - This Simple Strategy Has Never Lost Money
On Tuesday, we heard from Paul Tracy, a co-founder of StreetAuthority and chief investment strategist of StreetAuthority's Top 10 Stocks. Paul discussed a simple, long-term investing strategy that has never lost money and 10 stocks to hold forever.
Cabot Wealth Advisory 7/28/11 - Why Europe Will Likely Outperform the U.S.
On Tuesday Cabot Options Trader Editor Rick Pendergraft wrote that the resolved Greek debt crisis and the continuing U.S. debt crisis could cause European markets to outperform the U.S. in the coming months. Rick recommends two investments that will give you exposure to the European market. Investments discussed: Vanguard European VIPERs ETF (VGK) and iShares S&P Europe 350 Index Fund (IEV).
Until next time,
Editor of Cabot Wealth Advisory