It would seem that 2016 would come without warning that our investments are at risk. But actually there is. With much volatility happening last year, given the slowdown in China and US interest rate rising I have been warning about it in my blog and workshops. China slid into bear market territory and government money supporting the stockmarket to the tune of $500 Billion dollars went kaput. For those who have moved their money out of equities – where are they? In a bank account with the highest interest — which, coupled with lifestyle costs is still next to nothing. So yes, you can plan to get out of the stockmarket and park your cash and then put it back to work with investing strategies in the safest and highest-income paying stocks.
When do we get back in? I am asked — there are some ways I mentioned to my FB friends, like looking at the Resistance level, and check for retracement and that Resistance level is breached again, it is a signal for an upward climb. However, the current market is ruled more by sentiment than any kind of technical / fundamental basis. The fear is just strong right now (though it shouldn’t be because we’ve gotten fair warning before) and it is also spreading from market to market ie. from oil / mining industries to the creditors (financial companies) that have made their expansions possible. So, people tend to just move away from risk-taking.
But here’s the thing, money moves to where it is treated best. (Kind of like a relationship, will you stay if you are not happy? You move on!) Where is it being treated the best right now?! The place where it can grow.
So I’ve pointed out in lots of places in this blog, principally, you can put cash in the bank, but how much do we get for it? Just look at Australia which has one of the highest paying interest rates among safest credit rated economies – the term deposit rate is at 1.5% per year. Who lives on 1.5% income a year ? Retirees would have to dip / use their savings to support their expenses. The other thing though with cash, if you’re not in USD (the only country raising rates) your local currency will lose value and could increase your grocery / clothing costs if they are imported. (Which is the case with Australia, Canada, EU. many Asian and merging market countries).
The stockmarket offers an alternative — what sectors / stocks pay the highest dividend, what we can’t live without (that will still enjoy robust sales), plus also those with cash hoards that they can deploy to lessen debt, or grow with new products or buy companies. For example there are 52 of these “Dividend-Aristocrats” … some familiar names like Walmart pays 3.17 % or AT & T which pays 5.65% and because they pay these kinds of dividends, few would let them go and less prone to be sold-off – just lost less than 59 cents or .017% when all this selling started whereas others with no dividends paid like FB would lose $8 or 7.7% (Got the idea?!) . Do be careful as some high-dividend paying companies might have to cut their dividends if growth is slowing down which might be the case with some oil companies.
So I’d suggest, you stay cool and keep watching the market so you can put your cash to work. I will be speaking at some events so stay tuned.