Sound Advice in Early 2016 Remains Sound in mid-2017

This piece was published in my weekly column–Your Financial IQ–in The Arizona Republic on January 21, 2016 just weeks prior to the market bottom. Had you taken advantage of the advice: “don’t cave, don’t sell, don’t capitulate…rather this is the time time to upgrade your holdings, you would have enjoyed returns close to 30% as measured by the S&P 500.  Hopefully, by buying the stocks to own for a lifetime we advocate, you would have done even better.  The markets are volatile once again.  Investors are worried stocks are too expensive. The same advice holds true:  buy great companies, seek companies that pay a growing dividend and extend your time horizon.  Volatility is the nature of the beast.

January 21, 2016:  For 25 years, I commuted into San Francisco to work. During the Internet bubble at the end of the end of the 1990s, the traffic grew to epic proportions.

A normally 30-minute drive morphed into an hour, sometimes an hour and a half. Too many cars, too few lanes. The traffic made me crazy, and I drove like it. I was the driver who merged first into one lane and then another to anticipate the flow. Inevitably, once I switched lanes, the traffic slowed and the cars in my previous lane whooshed past. If I shifted back over, the traffic in front of me once again suddenly slowed and I watched another stream of cars whiz by on either side. By trying to anticipate future traffic flows, I inevitably came up short and increasingly frustrated.

On the heels of the worst short-term opening for stocks (ever!), it is important to have a plan, know your risk tolerance and to implement your discipline with conviction. One day I observed that changing lanes didn’t pay. The best strategy was to pick a particular lane and stick to it. I learned not to zig. Or zag. I resisted the lure of chasing the apparent traffic flow, because from my vantage — in the thick of the traffic jam — I lacked perspective so I stuck with my driving discipline and didn’t veer from the plan.

According to Deutsche Bank, the stock market, on average, has a correction every 357 days, or about once a year. Based on research conducted by John Prestbo of MarketWatch, between 1945-2013, the average correction in the DJIA (a decline of 13.3 percent) lasted a mere 71.6 trading days, or about 14 calendar weeks. Sell-offs don’t last forever and provide an excellent opportunity to buy great companies at a discount.

It is important to note that our aversion to loss can often overpower our desire for return. That is why the first of my 11 Intelligent Investing rules cites discipline: Having any investing discipline is better than having no discipline at all; once your investment strategy is established, never deviate.

In other words, in a market like the one we’ve experienced so far in 2016, don’t cave, don’t sell, don’t capitulate. Rather, this is the time to upgrade your holdings.

Recall my Starbucks (SBUX) example. It is important. In April 2007 I bought Starbucks after a 30percent decline to about $31 per share. In December of that year, Howard Shultz returned as CEO and the market cheered with a rally in SBUX’s price.

And then the financial crisis of 2008 hit and the stock declined to a low of around $8 per share. But even at my flawed purchase level of $31 in 2007, the stock has returned 198.8.8 percent versus 56.5 percent for the S&P 500 through Friday. Stick with your plan in good times and bad.

Nancy Tengler is the author of “The Women’s Guide to Successful Investing,” a financial-news commentator and university professor and Chief Investment Officer for Heartland Financial USA. Reach her at nancy.tengler@cox.net.

Don’t Let Market Volatility Distract You From You Goals

It is true. Stock returns can be unpredictable, which is why so many feel investing is like gambling — irrational, even scary. Echoing that sentiment, The Wall Street Journal’s Jason Zweig wrote over the weekend, “There is something poignantly human about every attempt to make markets behave as we all wish they would: always rising and making us richer, never falling and inflicting pain upon us.”

For all the volatility we’ve experienced this year, stocks are basically flat to modestly up. Down 300 points one day, up 250 points the next day. Exhausting, right? Only if we focus on the daily movements in stock prices. As investors, we must be in it for the long term, buying shares of stocks we are willing to own for a lifetime. Here’s why. According to the Dalbar 2010 Quantitative Analysis of Investor Behavior Study, the S&P 500 returned 9.14 percent over the previous 20 years, while the average investor in equity mutual funds earned 3.83 percent. This is because individuals tend to sell based on emotions, at just the wrong time. Yielding to emotions does not yield profits.

Let’s look at it another way.  To read more please click below:  TheArizonaRepublic

The Women’s Guide Named Amazon’s Best Business and Investing Book of the Month

I am thrilled.  See below from Amazon:

Each month, Amazon.com’s editorial team reads scores of books in search of those we consider the Best Books of the Month. We also seek and select the best books in popular categories like Cooking, Food & Wine books, Literature & Fiction, Children’s books, Mystery & Thrillers, Comics & Graphic Novels, Romance, Science Fiction & Fantasy, and the best books for kids and teens. We scour reviews and book news, we swap books amongst ourselves, and spend our nights and weekends tearing through as many of the best books as possible. Then we face off in a monthly Best Books showdown meeting to champion the books we think will resonate most with their readership.

The titles that make our Best Books of Month lists are the keepers, the ones we couldn’t forget. Many of our editorial picks for the best books are also customer favorites and bestsellers, but we strive to spotlight the best books you might not otherwise hear about. Each month we also pick “Spotlight” book (the #1 Editors’ Pick) and a “Debut Spotlight” (the best new book by a debut author).

The books included in Amazon’s Best Books of the Month program are entirely editorial selections. We have great passion for uniting readers of all ages and tastes with their next favorite read, helping our customers find terrific gifts, and drawing more attention to great books by exceptional authors.

The Women’s Guide to Successful Investing releases today, August 19th, 2014.