With the Dow Jones Industrial Average (NYSE: DIA) and the Standard & Poors 500 Index (NYSE: SPY) hitting record highs (chart below), those owning stocks should be very thankful. It looks like the future holds many thanks, too, as the bull market looks like it still has plenty of upside ahead, according to a recent article in The Wall Street Journal. It is receiving support from the Federal Reserve and others, which has proven to be very effective in making equities attractive to investors.
When central banks keep interest rates low as the Federal Reserve, Bank of Japan, and others have been doing, it makes equities attractive for a variety of factors. The low interest rates make the yields of debt instruments, such as bond, very unappealing. Low interest rates also make dividend-paying stocks much more desirable too. It also makes it cheaper to buy stocks.
There is a case to be made for buying stocks, no matter what the economic conditions.
Shelby Davis, a billionaire investor, whenever asked, “When was the best time to buy stocks?” would always reply, “Whenever you have the money.” Legendary investor Warren Buffett has much the same outlook as he has often stated that, “It is better to buy an excellent company at a fair price rather than a fair company at an excellent price.”
It is best to invest like Buffett and Davis for the long term in blue chip stocks that pay dividends that increase over time.
Buffett is heavily invested in companies like those such as Coca-Cola (NYSE: KO), Wal-Mart (NYSE: WMT), Exxon Mobil (NYSE: XOM), and Wells Fargo (NYSE: WFC). Shelby Davis prefers insurance companies. Buffett has done very well investing in insurance and oil companies, as detailed in a previous article on this site.
Whatever is chosen as the stock to buy, do it for the long term. It is impossible to time the market. Try to buy the equity for a company that increases its dividends, as that is a significant part of the historic total return for stocks.
Most important, Happy Thanksgiving to all!