The major stock market indexes, S&P, Dow and NASDAQ continues to rebound from the 10% correction of late 2015 and first two months of 2016 back to about where they were on January 1st. If you were like me I upped my cash position to about 15% in late 2015, as I saw the market correct. This is the largest cash position I’ve held for years.
Lately I’ve been buying back into some of my favorite stocks, or those on my list. I tend to be a longer term investor in any stock unless the story changes or there is an entire sector decline that drags them down. If a stock gets into trouble I sell 3-5 days after the first big drop, there is usually a bounce back before heading lower.
Now is the time to just sit tight, hopefully you didn’t sell in a panic earlier this year, you would have missed the 10% rebound.
Here are some of my thoughts:
- Don’t pay Federal Taxes if you can help it. Since I won’t start taking my Social Security until I’m 70 (2 years), I basically live off of my savings and therefore pay $0 Federal Taxes each year, this also allows me to convert an certain amount every year from my traditional IRA to my ROTH IRA. This is easy to calculate, just add your standard deduction and exemptions on your 1040. Tax rates are higher than savings rates, makes sense, no taxes.
- Always have your shopping list ready to go. I keep a list on my desk of the next 5 – 10 positions I want to add, some are current holding, others are new names that I’ll buy if I can get a good entry point. For example, I got out of Apple in December at about $115, I had a huge gain that I needed for tax reasons. I’ll wait until Apple sits around $105 – $110 for a while before I get back in.
- My strategy is to generate more interest in my IRA’s annually than is needed for my MRD beginning when I hit 70 years old. I’ll never touch the principle.
- Forget trying to pick a top or bottom in a stock, it’s only a fool’s exercise. Only buy on an upward chart (daily chart) and then only buy on a market down day.
- I’m careful to always keep tax ramifications in mind when deciding to buy or sell in a taxable vs, tax deferred account. My ROTH IRA account only has high yield equities in it.
- Other than a single ETF I do not have any bonds in my portfolio, I however have plenty of high yield preferred stocks, REIT’s and BSD’s in my IRA. If corporate or government bonds ever yield 5-7% again, I’ll start “laddering” my bond purchase and forget about them.
- I almost never buy mutual funds, I prefer ETF’s. CEF’s (Closed End Funds) bought at a discount to NAV without energy exposure and with high yields look pretty attractive right now, look for 7-8% yield.
Below is my current Sector Allocation, you’ll notice that I like strong Consumer stocks followed by the combination healthcare and Biotech’s. I’m completely out of all Financials until the Fed Rate starts to increase again.