Getting paid to wait

It's not a bull market and it's not a bear market, so what is it?

If it’s not a bull market, and it’s not a bear market, then what is it?

For years now markets have neither been going steadily up nor steadily down. Rather they have been going sideways: they go up it seems just long enough for people to get their hopes up.

Then they go back down — depressing many investors to the point where they almost lose hope.

Yet when all is said and done, market levels are not much higher or lower than they were a decade ago.

The same could be said for the 1966 to 1982 period: 16 years of an oscillating, sideways market.

So if you take the last 11 years, plus the 16 years from 1966 to 1982, that makes 27 years out of 45 during which markets have been more or less without direction.

It seems to me there should be a name for this type of market, and I could offer a few ideas.

But I would rather talk about investment strategies that work during such periods.

Buy and Hold is great during a bull market, but what works today?

One strategy that is gaining in popularity involves investing for income.

This has always been popular with investors who need income, but more and more, even investors who do not require income from their investments are electing to receive it anyway — giving them the choice of if and how they would like to reinvest it.

So the idea is this: the markets can go up and down indefinitely.

But as long as you continue to receive your income, who cares? It is kind of like buying a dairy cow.

Why worry about the price of beef as long as you’re getting your milk every day?

And here is the bonus: Sooner or later, as has always happened in the past, a transition will come. A new bull market will begin.

When will this happen?

Who knows? But there is one thing I can tell you: it will likely happen when you least expect it. And if history teaches us anything, it will likely begin at a time when it seems like things can’t get any worse.

But in the meantime, at least you’re getting paid to wait.

Keep in mind that there are tax implications with respect to investment income. Dividends, for example, can be problematic to some who receive government benefits. But there are ways to structure your investments to avoid this and other pitfalls.

Feel free to call or e-mail for more information.

 

 

Jim Grant, CFP (Certified Financial Planner) is a Financial Advisor with Raymond James Ltd (RJL). This article is for information only.  Securities are offered through Raymond James Ltd., member Canadian Investor Protection Fund (CIPF). Insurance and estate planning offered through Raymond James Financial Planning Ltd., not member CIPF.  For more information feel free to call Jim at (250) 594-1100, or email at jim.grant@raymondjames.ca. and/or visit www.jimgrant.ca.

 

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