Comments (scroll down to add your own):

1. Did this study include the dividend yield of the S&P 500 in the calculation?

   Comment by Brad — Jul 14th 2009 @ 6:12 pm

2. Stocks always do well starting from low or moderate valuation levels.

   Stocks always do poorly starting from sky-high price levels.

   I have come to believe that stocks are the same as anything else you can buy. They are a great deal at some prices and a horrible deal at other prices.

   Rob

   Comment by Rob Bennett — Jul 15th 2009 @ 12:33 pm

3. I would prefer to own equity in a profitable business and not own anything related to an unprofitable one

   Stocks have gathered a lot of negative publicity recently with the financial crisis, the “lost decade” and articles from Barrons about equities doing just as fine as fixed income.

   I believe that equities were overvalued in 1990’s, which is why we are digesting the excesses right now. Now equities are valued just right if you ask me ( except for Motors Liquidation of course ). I bought stocks when S&P 500 was at 1500, I also bought when it was at 700. If S&P 500 drops to 500 I would keep buying.. I am not going to run out of funds soon, as my purchases are funded by my dividend payments.. As long as the world economy keeps working, I would still get at least some dividends sent my way..

   Comment by Dividend Growth Investor — Jul 15th 2009 @ 2:02 pm

4. Investment Portfolio Protection Strategy

   A participant in the morning Working Capital Model (WCM) investment workshop observed: I’ve noticed that my account balances are returning to their (June 2007) levels. People are talking down the economy and the dollar. Is there any preemptive action I need to take?

   An afternoon workshop attendee spoke of a similar predicament, but cautioned that (with new high market value levels approaching) a repeat of the June 2007 through early March 2009 correction must be avoided— a portfolio protection plan is essential!

   What are they missing?

   These investors are taking pretty much for granted the fact that their investment portfolios had more than merely survived the most severe correction in financial market history. They had recouped all of their market value, and maintained their cash flow to boot.

   Their preemptive portfolio protection plan was already in place — and it worked amazingly well, as it certainly should for anyone who follows the general principles and disciplined strategies of the WCM.

   But instead of patting themselves on the back for their proper preparation and positioning, here they were, lamenting the possibility of the next dip in securities’ prices. Corrections, big and small, are a simple fact of investment life whose origination point, unfortunately, can only be identified using rear view mirrors.

   Investors constantly focus on the event instead of the opportunity that the event represents. Being retrospective instead of hindsightful helps us learn from our experiences. The length, depth, and scope of the financial crisis correction were unknowns in mid-2007. The parameters of the current advance are just as much of a mystery— today.

   The WCM forces us to prepare for cyclical oscillations by requiring: (a) that we take reasonable profits quickly whenever they are available, (b) that we maintain our “cost-based” asset allocation formula using long-term (like retirement, Bunky) goals, and that we slowly move into new opportunities only after downturns that the “conventional wisdom” identifies as correction level— i. e., twenty percent.

   So, a better question, concern, or observation during a rally (Yes, Virginia, seven consecutive months to the upside is a rally.), given the extraordinary performance scenario that these investors acknowledge, would be: What can I do to take advantage of the market cycle even more effectively— the next time?

   The answer is as practically simple as it is emotionally difficult. You need to add to portfolios during precipitous or long term market downturns to take advantage of lower prices— just as you would do in every other aspect of your life. You need first to establish new positions, and then to add to old ones that continue to live up to WCM quality standards.

   For the rest of the article, just Google the title.

   Steve Selengut

   Comment by Steve Selengut — Oct 26th 2009 @ 3:16 pm

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