There is a great quote from the movie Karate Kid when Mr Miyagi is saying to Daniel “Walk right side. Safe. Walk left side. Safe. Walk middle, sooner or later … squish”. (Spoiler: this isn’t about politics left-right-center, sorry). The idea … is to be all-in, fully committed to a path.
There is a continuous debate between investing in Value stocks or Growth stocks. They have quite different and sometimes opposing performance trends. Some investors believe fully in one and some fully in the other and there are merits to both. Growth stocks tend to include companies that are trying to innovate and evolve the way things are done, to find the next efficiency or the next discovery or the next trinket that the world descends upon. They tend to reinvest profits back into the growth of the company instead of paying the growth out to shareholders. Making money in growth stocks tends to require selling them at a higher price point than when you bought them. This sounds easier than it sometimes is: (1) you have to be willing to sell – to let go – when the stock looks fabulous, (2) you have to “know” that the price is at a peak, and (3) you may have to be willing to pay taxes on the gains if invested in a taxable (non-IRA) account. Psychologically those can be real challenges.
Value stocks often pay profits out to shareholders as dividends. There is sometimes great value in having money in your pocket now instead of waiting for potential growth. Retirees may rely on the dividends to provide stable income, especially with interest rates so low right now.
Invest in Growth stocks, historically fine. Invest in Value stocks, historically fine. Invest in a mix, historically fine. Switch to whichever one is performing better at the time … squish.
By Cammie Humke, Registered Representative at The Humke Group, Inc
Located at 555 S. Randall Rd #103 in St. Charles, IL 60174, phone 630-584-7343
The Humke Group, Inc is an independent firm. Securities offered through Cetera Advisor Networks LLC, member FINRA/SIPC. Advisory services offered through Summit Financial Group, Inc., a registered investment adviser. Summit and Cetera are affiliated and under separate ownership from any other named entity.
Market Commentary: The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. A diversified portfolio does not assure a profit or protect against loss in a declining market. The return and principal value of stocks fluctuate with changes in market conditions. Shares when sold may be worth more or less than their original cost. Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing. All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.