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The readers speak...

Written by Jimmy Mengel
Posted October 9, 2020

"We have two ears and one tongue so that we would listen more and talk less."
– Diogenes the Cynic

It's awfully easy to get stuck deep in your own head when you're a writer. I tend to hunker down with my eyes on the screen and try to cut out the rest of the world entirely. Once my research is done I rarely seek anyone else's opinion once my mind is set on something.

That's no way to live. In order to learn, you have to listen.

That is the main reason we started Trend Tracker — a weekly video series where we spell out exactly where we think the markets are going, what trends we're watching, and all the wild things we're thinking that aren't necessarily fit to print.

It's bold, it's timely, and it's pretty damn funny.

Considering how fast the world is moving each and every day, I know it can feel like an eternity when you're waiting for your monthly issue. Plus, we're only human and can't possibly cover everything we'd like on the written page. The Trend Tracker videos open up the topics in a liberating way.

It's been incredibly enlightening and cathartic.

My favorite part is our live editor video call with subscribers. When you join, you can start peppering us with questions right away: no questions are off-limits (so far that is, so let's not ruin it by asking what we're wearing underneath our desks).

I just held one yesterday, in fact, and I wanted to share a few questions I got. I'm sure that many — if not all — of you have had the same ones yourselves...

Should I just get out of the market entirely? I'm getting more anxious every day...

You aren't alone Hannah. As far as anxiety goes, I'd say that we've all felt a giant shadow looming over us — not just in the market, but regarding life as we know it. It's been a scary year, to put it mildly...

The number of prescriptions for antidepressant, anti-anxiety, and anti-insomnia medications increased 21% between February and March. Anti-anxiety medications had the biggest spike at 34%

It's already gotten worse, and that trend is likely to continue rising for the foreseeable future

But these short-term worries shouldn't make you completely lose your cool: you don't toss everything off the boat during a storm. You certainly want to hold on to valuable tools that have served you over the years and will continue to serve you for the rest of your life. We've been through depressions, recessions, and World Wars. If you had stayed invested through all of them, you'd still be coming out way ahead.

Just look at the S&P since the 2009 financial crisis:

That's around 317% since the biggest financial meltdown since the Great Depression.

In other words, don't panic: this too shall pass.

Now, all of these considerations depend on your age. If you're nearing retirement you should be allocating your investments accordingly. Say you're a typical 60-year-old, for instance. Most experts would suggest that only 40% of your portfolio should be in stocks. The rest would comprise of high-grade bonds, government debt, and cold, hard cash.

If you're young and are afforded the time needed to recover if risk slaps you in the face, then have at it. Buy dips on companies you like and go long. Take a flier on trends like cannabis, electric vehicles, or biotech. Just don't risk your life on any one idea and make sure you have the means to lose whatever you do risk.

And let's touch briefly on the whole anxiety issue...

As far as anxiety and depression investing goes, Pfizer (NYSE: PFE) distributes both Xanax and Zoloft, which — sadly — should continue to be prescribed as millions of people will certainly experience one or both as we recover from this dark chapter in our history.

The stock has declined over 7% this year, but it yields a dividend over 4% and has an average analyst price target of $42.66. That's an upside of 17% in the year ahead for a company that should continue to be a major player in the Pharma space for many years to come.

It also has several COVID vaccines in the works, which could prove to be a big boon if it lands one.

I typically don't like investing in fear and misery, but sometimes it can make for an important piece for a balanced portfolio...

How worried should I be that many of the companies I own have cut their dividends this year?

That is an excellent question. As Jeffrey mentioned, a number of companies have cut their dividend payments this year due to slowed revenue and uncertainly due to the COVID-19 pandemic. It has been a bloodbath for dividends this year, and the second quarter was the equivalent of a slasher movie: 639 companies cut or suspended their dividends

That is the most blood spilled since 2009:

dividend cuts

That includes stalwart blue chips like Boeing (NYSE: BA), Ford (NYSE: F), General Motors (NYSE: GM), and Disney (NYSE: DIS).

Long-time readers will know my stance on dividend stocks: they are absolutely critical to a long-term portfolio.

I've also made it well known that dividend cuts are one of my biggest fears. That's why I've beaten the drum on Dividend Aristocrats for years now. These are companies that have raised their dividend for at least 25 years. Some of them have done so for over a century.

How many dividend aristocrats have cut their dividends this year?

Not a one. How's that for resilience?

In the Crow's Nest, we've seen how powerful these Aristocrats can be. Here are some from the portfolio:

  • Abbvie (ABBV) 101%
  • Abbott Labs (ABT) 210%
  • McCormick and Company (MKC) 177%
  • Sherwin-Williams Company (SHW) 192%
  • Home Depot (HD) 91%

All of those companies are still long-term buys.

As psychology has proven, a single negative experience is more memorable than 10 good ones. Dividends are the same way: while small, incremental dividend hikes may not blow you away, one dividend cut is likely to sour investors on a company for years to come.

Make sure you stock your portfolio with dividend growers and avoid bloated and vulnerable yields.

That is just the tip of the proverbial iceberg. We had dozens of other questions come in, and I'll share a few more with you next week.

In the meantime, you can sign up for Trend Tracker to get your voice heard. We're gearing up for another round right now and we'd be honored if you joined us.


Jimmy Mengel

follow basic @mengeled on Twitter

Jimmy is a managing editor for Outsider Club and the investment director of several personal finance advisories, The Crow's Nest, and The Adventure Capitalist For more on Jimmy, check out his editor's page.

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