Business Viewpoint: Counter market uncertainty with investing fundamentals
BY JAMES K. "SKIP" NICHOLS Business Viewpoint
Thursday, September 27, 2012
9/27/12 at 5:32 AM
How do you value the cost of uncertainty?
Uncertainty, mixed with doubt and confusion, is confronting many investors as they prepare for their kids' college years or their own retirement. These people are thinking, "Let's wait and see what happens before we invest."
If one thing can be said for sure, it's that there's more uncertainty ahead.
But successful investors, such as Warren Buffett, know they can't control the outcome of the eurozone summits or fiscal debates here in the United States. However, they can control reviewing their goals, managing risk, being mindful of valuations and yields, and remembering that diversification may matter now more than ever.
Unsettled times provide opportunities if you're a long-term investor (i.e., Microsoft and Apple). In tough times there are companies whose values are quite attractive. They continue to thrive because of their smart management, strong balance sheets and innovative products.
As an investor, don't feel powerless because of the uncertainty. Yes, it is hard to feel in control, but there are some things you can control that provide you a sense of stability.
First, are your investments aligned with your objectives? Those objectives may be income or capital preservation or growth. This will help you shift the focus from short-term market conditions to long-term goals and needs.
Second, in confusing and uncertain times we suggest investing in strong companies whose management has a history of paying high dividends. Many of the 500 largest companies in the U.S. are paying dividends in the range of 2.2 percent to 3.5 percent. A dividend-focused strategy has the potential to dampen the volatility of an equity portfolio.
Third, diversification is a key issue. Having a truly global perspective should enhance the success of your long-term investment portfolio. Many companies are benefiting from new markets created by the growth of developing countries and their creation of a new middle class.
Let these steps move you from confusion and uncertainty to a successful long-term investment outlook.
Original Print Headline: Counter uncertainty with fundamentals
James K. "Skip" Nichols is president of Financial Planning Resources in Tulsa.
The views expressed here are those of the author and not necessarily the Tulsa World. To inquire about writing a Business Viewpoint column, email a short outline of the article to Business Editor John Stancavage at john.stancavage@tulsaworld.com. The column should focus on a business trend; the outlook for the city, state or an industry; or a topic of interest in an area of the writer's expertise. Articles should not promote a business or be overly political in nature.
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