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John A. was ready to call it a day and head off into the proverbial sunset in early 2009. Like many retirees, he was eager to live the life of his dreams.
Only, the timing couldn't have been worse.
The stock market tanked in 2008 and continued to drop precipitously into early March. John's financial planner had all but conveniently disappeared, and John found all the red in his brokerage statements deeply disturbing. He recalls some of his stocks "dropping by more than 50%."
Yet, John stuck to it.
In fact, he stayed "in to win" - something we talk about frequently.
I asked him why he'd decided to hold his positions at a time when other investors were bailing out as fast as they could. He said it was simply because he'd invested in high-income companies that made products and services the world had to have, which reflected solid management acumen, and mirrored his vision of the future.
All of which ought to sound very familiar considering those are the exact principles around which Total Wealth is built and why we take the approach we do.
A Whole New World
Today's markets are even more intense. There have been a record-setting 70 new highs this year with the Dow, and the S&P 500 and the Nasdaq are both pushing higher.
Stocks have run up an incredible 25.5%, and the markets have created an estimated $5.2 trillion in new wealth since last November. Finding quality companies at reasonable prices is harder than ever, especially if you're an income investor.
PE ratios are trading into the stratosphere - meaning prices are high relative to earnings - even as a number of once-dependable dividend-related players are at serious risk of a blowout, including, most notably, General Electric Co. (NYSE: GE), which we talked about earlier this week.
So how do you get around that?
By doing three things:
- Picking the highest quality companies you can find
- Making certain they're tapped into at least one of the six Unstoppable Trends we follow
- Producing "must-have" products and services the world cannot live without
To me, this means big brands and even bigger cash flow, with low or no debt. I won't look twice at any company that isn't a substantial player or an industry leader because the risks just aren't worth it. Further, I place a premium on companies that are not facing existential problems due to their own incompetence, outdated products, vanishing markets, or disruptive competitors.
The easiest way to identify companies that fit these requirements is to take a good look at where you are now, where you want to be in the future, and which companies are going to make that possible, especially when it comes to technology.
Most investors think about technology only in terms of absolute growth, which is a shame considering how much income they can kick off.
It's a combination that simply cannot be beat.
Studies show that income and reinvestment can account for 70%, 80%, or even 90%+ of total returns over long periods of time. So much so that you could eventually earn more in income from certain stocks than it took to buy 'em in the first place.
Here are three to get you started...
About the Author
Keith is a seasoned market analyst and professional trader with more than 37 years of global experience. He is one of very few experts to correctly see both the dot.bomb crisis and the ongoing financial crisis coming ahead of time - and one of even fewer to help millions of investors around the world successfully navigate them both. Forbes hailed him as a "Market Visionary." He is a regular on FOX Business News and Yahoo! Finance, and his observations have been featured in Bloomberg, The Wall Street Journal, WIRED, and MarketWatch. Keith previously led The Money Map Report, Money Map's flagship newsletter, as Chief Investment Strategist, from 20007 to 2020. Keith holds a BS in management and finance from Skidmore College and an MS in international finance (with a focus on Japanese business science) from Chaminade University. He regularly travels the world in search of investment opportunities others don't yet see or understand.