Retired Investors: Turbulence Has Returned

by: Bob Wells

Earnings Season is all but over and the market is back to a period where it is news driven. It is not unusual for such a period to reflect greater volatility. For retirees who are Dividend Growth investors that has clearly been the case the past few days. I hope each of you have used this opportunity to pick up a bargain or two to add to your portfolio. I think we all know there's likely to be more weakness ahead so I believe it's an ideal time for each of us to take a closer look at our holdings. We are all at different stages in investing. Some have been retired for some time now and are comfortable with their portfolio and the income it provides. Others may be just getting back into the market after what happened to their investments in 2008/2009. Some are transitioning from owning mutual funds in their 401Ks to becoming self - directed investors.

I guess you could say I'm all of the above. I started as a self directed investor in 2011. Like a lot of folks I chased yield for a while. In the turbulence of the summer of 2011, I got concerned. It felt like it might be 2008 all over again. I started back-testing looking for stocks that had performed the best during the best of times. I wanted to see what stocks had performed the best between 2002 and 2011. At first I was only considering performance. I quickly moved to stocks that I had discovered though back-testing were the "best of the best." It was later that year that I discovered that most of the "best of the best" were members of the Dividend Champions, Challengers and Contenders and were Dividend Growth stocks. What I learned was that even though these stocks lost less or in some cases even made money during turbulent markets even more importantly they had retained and even grew their dividend. Since I was now retired that fact was important. Dividend cuts meant a loss in income. For a closer look at my Safety Superstar click here and here.

With the run up in the market the past year and the volatility of this week, it's starting to feel a little like 2011 again. I think that in times like this there is a question we need to ask about every stock we own: Is this a stock I'm comfortable holding in a time of weakness? The way I suggest you answer that question is to go to the Morningstar website and run a 10-year performance history for each of your stocks. It's easy; just follow along with me for each of the stocks you currently own. At the website home page, place a stock ticker in the quote box. Look for the light grey bar and click on the performance tab. You now have the five-year history but why stop there. For a year by year 10-year history just click on expanded view. You can also add a few stocks and compare performance by clicking on the compare button.

I make a point to go to the Morningstar site and follow the steps just outlined when I'm considering any stock for purchase. I make a point to record the 10-year performance history of each stock I own in a logbook making future reference a snap.

Another move you may wish to consider is position rebalancing. I like to keep my positions as close to equal as possible. I'm using this opportunity to take profits on some of my lower-yielding positions and redeploy the funds to balance some of my small positions. I'll be providing more detail on my portfolio as part of my next update.

I believe it would be particularly valuable for all of us to continue this discussion. It is time to hear from you about how you handle increased market turbulence. I'd love to get your spin on the following questions:

  • How did the 10-year stock history exercise affect your feelings about your current holding?
  • What stocks are you considering for a trim?
  • What stocks are you considering for sell?
  • What have you bought this week?
  • What are you considering for purchase if weakness continues?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.