I distinctly recall laying in bed in 1986 as a newly appointed teenager, listening to Van Halen’s latest single, ‘Dreams,’ from their ‘5150’ album. I still like the song to this day when it randomly airs somewhere, and its chorus could serve as the stock market mantra over not only the past two weeks, but the past four years.
Less than two weeks ago the S&P 500 took a ride straight down and dipped as low as 1820 or so in intraday trading. I saw pretty much every stock on my watch list with a big “manager’s special” sticker slapped on it, begging me to take advantage of the limited time offer of unknown duration.
I would of if I could of, but I couldn’t. Call it empty wallet syndrome.
In the blink of an eye the Fed came out and suggested that more quantitative easing could be in the cards and the market reacted to the remarks by turning on a dime and soaring to new heights. As of late last week I finally have new capital to deploy and low and behold the S&P 500 and Dow just closed at all-time highs.
The limited time offer was over before I could make it to the store.
Now I sit in a scenario that all dividend growth investors face at one time or another. There’s fresh capital to deploy and the markets are on a tear — again. Do I bite the bullet and buy new stocks now, or do I play the waiting game for another dip?
There’s no easy answer to this question and everyone has their own opinion on the matter. I try to look at the options from both sides of the fence, weigh the pros and cons, and make the best informed decision I can.
Buying now means I’m willing to forget about the market gyrations and focus squarely on the distant horizon. Will it really matter if I bought a stock today or five percent lower when looking back from the year 2024? The answer is debatable, but ultimately it weighs toward “no.”
Waiting could maximize my returns by scoring a higher yield when a stock is suppressed. Aside from ARCP, which I won’t be adding to despite another dip on November 3, my entire portfolio and everything I would want to purchase is notably higher than it was two weeks ago. Surely something I want would have to pull back, and then I’d be able to stake my position at a higher yield.
It can be difficult to raise $1,000 or more for a single stock purchase with the $7 commission at Scottrade in my personal situation. While I’m willing to freely reinvest dividends, I’m much more cautious when making an outright purchase since I don’t know when the wallet will be replenished.
Given the uncertainty of when new funds will be available, and coupling that with trying to maximize yield, for now I’m going to sit on the sidelines and wait for the right opportunity to come along.
The markets are generally open five days a week. There are plenty more shopping days ahead.