Happy Halloween! It’s a time to get out with your kids and give them a scare, with the reward of some tasty treats for when they (and you; let’s be honest) get home. If only the stock market worked this way, because it’s been quite the scary place as of late.
Yet there are some tricks that you can use for some future treats. While they won’t be placed in your portfolio as quickly as those chocolates in your kid’s pillowcase, they’ll definitely be quite sweet down the line.
Dollar-cost averaging
If you’re looking to reduce volatility, dollar-cost averaging (DCA) is an excellent investment strategy. This involves investing the same amount of money again and again at the same time each week, month, quarter, or year. And you do this no matter the share price.
I know; this can sound sickening. However, instead of trying to time the market to buy low and sell high, this method of investing allows you to remain consistent, disciplined, and more likely to receive returns. After all, over time, the market goes up, not down.
Of course, there are a few things to consider. First, don’t invest more than you can afford. Then, keep your emotions out of it! Set up automated contributions to these stocks again and again. And finally, choose the right stocks. Don’t go with a risky investment, but one proven to do well over time.
Contrarian investing
Another terrific trick is partaking in contrarian investing. This is the method of investing in places that the market is avoiding, like the plague. Instead of going with the crowd, find the stocks that are bound to do well again eventually. And you know who loves this method? Warren Buffett. And things have worked out alright for him.
To get started, find sectors that perhaps aren’t doing well now but should in the future. Right now, that might be utilities. This sector has suffered recently from rising interest rates, but investment into infrastructure and expansions is still in this industry’s future, which is why it’s an area to look for contrarian investment.
The key is to look for value and a long-term strategy. So, seek out those with lower price-to-earnings (P/E) ratios. Ones that have a history of dividend increase. Ones that also have a long history of strength on the market. This is definitely a great place to start.
Keep a long-term focus
It can be incredibly tempting to look at your stocks as they drop and just sell it all. Get out of the market if it’s dropping, right? Wrong. As I said, the market increases over time. With that in mind, stay true to your goals. If you don’t need the cash, leave it alone.
In fact, this should always be your focus when it comes to investing. Don’t invest for a year or even three years. Think perhaps decades down the line. Again, Warren Buffett is very good at this. As he has famously stated, don’t invest in a stock for 10 minutes if you wouldn’t buy it for 10 years.
A final treat
Now that we’ve gone over these three tricks, here’s a treat to consider. Buy a stock like Canadian Utilities (TSX:CU), which ticks all the boxes. Shares are trading at just 13.83 times earnings at the time of writing. It’s down 18% in the last year but has decades of growth behind it.
What’s more, you can bring in a Dividend King! That means it’s increased its dividend for the last 50 consecutive years! As for shares, if you invested in Canadian Utilities 20 years ago, your shares would be up 107% in that time. All while receiving a solid dividend, currently at a yield of 6.12%. And with that, enjoy your treats and happy hunting!
