Have You Taken My Advice?

This year I’ve written blogs entitled “Don’t Panic”, “I Hope You Didn’t Sell”, “It’s Still Not Time To Panic”, “Tech Stocks On Sale” and “The Market Continues To Climb A Wall Of Worry”, to name a few. Do you see the trend? Throughout the year I’ve urged my newsletter and blog readers, as well as my clients, to simply sit tight, ignore the pundits, and maintain their equity positions. There has been nothing to dissuade me that domestic equities are the best investment category for most investors this year.

And as I sit here moments after the market opened, the #DJIA is trading just over 17,000, again within spitting distance of its all time closing high of 17,138.20 set on July 16. Even better, the #S&P500 is less than two points from its closing high of 1,988.31 set on July 23. The tech heavy #NASDAQ is over 4,500, its highest level in 14 years, and approaching the all time high closing price of 5,048.62 set at the height of the tech bubble on March 10, 2000. Without question, the bull market remains in force.

Why have I been so sure about my position to remain fully invested in the face every foreign and domestic problem, both economic and political? It’s very simple: the Federal Reserve and its¬†easy money policy. As long as their accommodative monetary remains in place, there is no reason to contemplate selling. And I believe there will be no policy changes until the second quarter of next year, at the earliest. They will err on the side of waiting too long to raise rates, and possibly allow inflation to grow more rapidly than they would prefer, rather than risk putting the brakes on economic growth.

Even when they do begin to raise rates, which they will likely do in a VERY measured fashion, I believe the market can continue to rise, because it will be confirmation that the economy is improving, and that is good for business, which is good for stocks. But that will be an argument for next year. For now, my advice remains the same: stay the course. Ignore the Talking Heads and tune out the blather. Buy the dips. Own quality stocks and reinvest your dividends. This is the best way to save an invest for your future.

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Tech Stocks Going On Sale

There is a sale going on right now in technology stocks: are you buying? Since hitting a high on March 6, the tech sector, as represented by the NASDAQ, has dropped 6.25%. More recently, the index has dropped 4.58% in just the past four trading days alone. Previous high-flyers like FireEye (FEYE – down 49%), Twitter (TWTR – down 43%), Rackspace (RAX – down 38%), Yelp (YELP – down 32%) and Netflix (NFLX – down 25%) are just a few of the examples of the recent carnage.

So what’s a growth investor to do? Do what I do: make a list of the stocks you’d like to own, along with an entry point at which you would start to buy. If a stock you want falls into the buy range, don’t buy a full position right away. This way you’re protected in case the price continues to fall. Consider buying in three equal tranches to build a full position.

Unless you’re a seasoned growth investor, be careful about which stocks you go after. You may want to pass on those trading at triple-digit multiples, or without earnings of any kind. These “story” stocks can be incredibly volatile and short-term losses can be severe. Just take a look at the¬†chart for 3D Systems (DDD). If you can’t stomach the ups and downs of that rollercoaster ride then perhaps you may want to look at more seasoned at companies like Amazon (AMZN), Mastercard (MA) or even Facebook (FB).

Whatever you choose, go in with the understanding that you may have to be patient as you wait for the sector to recover. If you manage your expectations, and invest a reasonable amount of money (probably starting at 5-10%) then this could be a good time to dip your toes in the high growth arena.

 

*Disclosure: Werlinich Asset Management, LLC owns small positions in NFLX, AMZN and FB.