{"id":60854,"date":"2012-11-07T11:38:08","date_gmt":"2012-11-07T00:38:08","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2012\/11\/07\/contrarian-investing-make-money-going-against-the-crowd\/"},"modified":"2012-11-07T11:38:08","modified_gmt":"2012-11-07T00:38:08","slug":"contrarian-investing-make-money-going-against-the-crowd","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2012\/11\/07\/contrarian-investing-make-money-going-against-the-crowd\/","title":{"rendered":"Contrarian Investing: Make Money Going Against The Crowd"},"content":{"rendered":"

\n\tBy Marc Lichtenfeld<\/span>, Investment U<\/em> Senior Analyst<\/p>\n

\n\tThis weekend, I was at a boxing match, talking with someone affiliated with the show. He used to work on Wall Street. I asked him if he missed it. “Hell, no,” he said quickly. “Wall Street makes boxing look like an honest business.”<\/p>\n

\n\tAfter the financial collapse, flash crash and various scandals, that’s the way many people view Wall Street.<\/p>\n

\n\tAnd that’s despite the current bull market being the ninth longest in history – out of 26.<\/p>\n

\n\tFrom its lowest point to its peak, this bull market was up 121%. After the recent sell-off, we’re currently up 118%. That makes the current market the seventh-strongest market in terms of gains.<\/p>\n

\n\t\"\"<\/p>\n

\n\tIn an excellent Wall Street Daily<\/em> article, my colleague Louis Basenese<\/span> points out that of the eight longer bulls, the second half of the bull market equaled or topped the performance of the first half in five of them.<\/p>\n

\n\tYet, according to AAII’s<\/span> Investor Sentiment Survey, only 29.2% of investors are bullish while 43.1% are bearish. The long-term average is 39% bullish and 30% bearish.<\/p>\n

\n\tSo despite being in one of the top 10 strongest markets in history, investors aren’t buying it (figuratively and literally). In fact, the average investor’s timing has been nothing short of abysmal.<\/p>\n

\n\tInvestors have taken money out of equity mutual funds for 17 consecutive months. In September, the industry saw nearly $14-billion worth of funds redeemed, despite the market making new bull market highs in six of those 17 months.<\/p>\n

\n\tJust like I advocate betting against Wall Street’s sell-side analysts, I also recommend fading (betting against) the general public. As long as there is so much fear out there, the market should go higher…<\/p>\n

\n\tFear of the Unknown<\/strong><\/p>\n

\n\tI understand the fear – there’s a lot to be fearful about. We’re either about to elect a President who’s a Kenyan Marxist Terrorist who hates America or a Flip-Flopping, Woman-Hating, Silver Spoon Born “One-Percenter<\/span>,” who’s the puppet of billionaire businessmen.<\/p>\n

\n\tThen, of course, there’s Europe (which will surely collapse), impossibly low interest rates that will soon make the Zimbabwean dollar look stable compared to the greenback and a nuclear-armed Iran whose leaders can’t wait to let the missiles fly so they can be in the loving arms of 72 brown-eyed virgins.<\/p>\n

\n\tThe problems are real. And there will be new ones rearing their ugly heads soon.<\/p>\n

\n\tBut the world has always had problems. Ten years ago, we were in the midst of the worst bear market in history, one that saw the stock market get cut in half. There was fear that the economy was slowing. (Isn’t there always?) We were still licking our wounds from 9\/11 and getting ready to invade Iraq in a war that was as unpopular as Vietnam.<\/p>\n

\n\tDespite those serious issues, the market is up 59.4% during those years – which also included another nasty bear market and a near financial meltdown. Not bad considering.<\/p>\n

\n\tHow to Play it Safely<\/strong><\/p>\n

\n\tIf you’re concerned about the market, but also see the intelligence of going against the crowd, consider Perpetual Dividend Raisers – stocks that raise their dividends every year.<\/p>\n

\n\tNow, many “experts” will tell you these stocks are overvalued, because they’ve been hot for a while. But if you’re investing for the long term, Perpetual Dividend Raisers typically go up more in bull markets and go down less in bear markets than the broader indices.<\/p>\n

\n\tFor example, since the 10-year period ending in 2002 – not including dividends, just share price appreciation – the market has risen an average of 71% over 10 years (1993-2002, 1994-2003, etc.). That comes out to an average annual growth rate of 5.5%.<\/p>\n

\n\tDividend Aristocrats, stocks that have raised their dividends every year for 25 years, climbed 103% or 7.29% annually.<\/p>\n

\n\tWhen you include dividends, the market returned an average of 96% over 10 years or an average of 6.98% annually versus the Aristocrats return of 162%, or 10.11%.<\/p>\n

\n\tThat 10.11% figure incorporates at least one bear market and in many cases two, in each variable in the calculation. I’m sure most investors would be satisfied with earning an average of double digits annually on their long-term money especially after weathering a vicious bear market or two.<\/p>\n

\n\tA 10.11% compound annual growth rate doubles your money in just over seven years. It triples your investment in just over 11 years.<\/p>\n

\n\tAvoid Trying to Time the Market<\/strong><\/p>\n

\n\tThe point is, don’t try to time the market. There are problems in the world. There are crooks on Wall Street, but that shouldn’t stop you from investing to reach your goals. Just like you don’t let the fact that you could get hit by a bus crossing the street stop you from going about your daily activities.<\/p>\n

\n\tIf you’re invested for the long term (especially if you’re invested in Perpetual Dividend Raisers) and don’t give your money to suspicious characters to manage for you, you’ll be fine.<\/p>\n

\n\tWhen the general public is afraid of Wall Street, that’s the time to be invested. You’ll be selling your shares to them at higher prices when they come back in droves.<\/p>\n

\n\tGood Investing,<\/p>\n

\n\tMarc <\/p>\n

\n\tReprinted with permission of the publisher. The above story can be read on the website www.investmentU.com. The direct link is: LINK]<\/em><\/p>\n

\n\tNothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.<\/em><\/p>\n

\n\tViews expressed are not FNArena's (see our disclaimer).<\/p>\n

\n\tFind out why FNArena subscribers like the service so much: "Your Feedback (Thank You)<\/a>" – Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Investment U’s Marc Lichtenfeld highlights potential for investors to generate good returns by going against the crowd and investing in perpetual dividend raisers.<\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5],"tags":[],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/60854"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=60854"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/60854\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=60854"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=60854"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=60854"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}