The failure rate for barbershops must have been high in the seventies. We all had big hair. Mine was half way down my back at one point, and about as unruly as the occasional eyebrow or ear hair is for me now. Commenting on my massive mop, my grade nine homeroom teacher nicknamed me: "Amazon," much to the delight of my classmates.
Knowing that the name really bothered me, most of my friends backed off, but one of my buddies couldn't help himself. He was in my inner circle of friends, but the moniker tickled his fourteen year-old brain so much that he just couldn't let it go. Day after day he burst in to giggles, muttering "A-ma-zon" in my direction.
As much as he just couldn't let it go, I just couldn't let it slide -- my rising anger was probably fuelling his torments. Finally one morning, just as the bell rang to begin classes, he threw the name in my face one last time in the hallway outside our locker area. Indignantly I grabbed the front of his shirt with both hands and slammed him hard up against his locker, shouting: "That's enough, shut up!" We were both smiling, but there was some tension in the moment.
At that instant the back of my head received what felt like a baseball bat. Everything went back and I fell to the tiled cement floor where I lay for a few seconds, oblivious to my surroundings. When I awoke, I was looking at dozens of feet and legs literally stepping over and around me in the busy hallway that served as a thoroughfare for students rushing to class.
It seems that an older, larger neighbour of my friend had come along just as I was (quite harmlessly) jamming him against his locker. Thinking it prudent to protect his younger friend from what appeared to be a bully, the older boy punched me solidly in the back of the head. Quickly realizing that he might have overdone it, he slipped away as if nothing had happened.
I nursed a headache for several hours but carried on with only minimal brain damage. Meanwhile, my pal and I made peace, but I have never entered any sort of conflict since that moment without checking my back first.
About five years ago our financial markets received a severe and unexpected blow, and everything seemed to go black for a while. Many of us are still looking warily behind us for another deadly attack. Investing has always been accompanied by uncertainty. Headlines have conspired to keep investors out of the market on almost a daily basis. But, as the saying goes, "the asteroid misses the earth the majority of the time."
Dividend-paying stocks have been the concussion-proof helmet for investors, outperforming broader market indices consistently over time. This has been especially true during periods when economic growth was sub-par, such as the 1940s, 1970s, and 2000s. The biggest risk for individual investors is exiting or entering the market at precisely the wrong time. There is a hard-wired need in our helmetless heads to avoid pain and seek pleasure. In the investing arena, this means we want to buy what's been working, and avoid what's out of favor. The persistence of dividends can help keep investors in the game.
The fear/greed cycle is one of the most difficult for investors to control alone, which is why we suggest employing strategies to counter that tendency. The wise counsel provided investors by a trusted advisor around these tendencies is worth its weight in gold. They should talk you off the ledge without talking you in to something that just isn't you.
Today it is counterintuitive. Scratch that -- it's always counterintuitive; despite a recent run-up, stocks trade at a valuation discount to bonds. But as discussed above, investing against the trend is difficult. In the early 2000s, gold and oil were clearly inexpensive, but also out of favor, having underperformed for more than a decade. Many investors ignored these asset classes and, instead, clamored for what had been working--the technology stocks. Current data tells us that stocks now provide better value than bonds. Yet, it's easy to be immobilized by troubling headlines.
Employing a trusted advisor or savvy friend as a sounding board and engaging the concepts of dividends and dividend reinvestment can help protect us from our worst enemy--ourselves.
Mark Ryan is an advisor I Prince George with RBC Wealth Management, Dominion Securities (member CIPF) and can be reached at [email protected].
