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High Volatility? No Worries, Big Gains Ahead

Oct. 05, 2021 10:35 AM ETDIA, IWM, QQQ, SPY91 Comments


  • The month of September (the worst month of the year historically) is over.
  • There is probably more volatility ahead, but this is healthy, and a great time to buy any dips.
  • We remain in a very strong bull market. Investors need not worry. I explain why.
  • There is a huge upside for cyclical and inflation-resistant stocks in the 4th quarter, and over the next 12 months at least.
  • Long-term investors are set to be very well rewarded!
  • Looking for a portfolio of ideas like this one? Members of High Dividend Opportunities get exclusive access to our model portfolio. Learn More »

Charging Bull sculpture in New York City

AndreyKrav/iStock Editorial via Getty Images


The month of September was over on Thursday, and it was the worst month of the year. U.S. stocks tumbled as rising bond yields deepened a rout in growth and technology stocks. The S&P 500 index closed

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This article was written by

Rida Morwa profile picture

Rida Morwa is a former investment and commercial Banker, with over 35 years of experience. He has been advising individual and institutional clients on high-yield investment strategies since 1991.

Rida Morwa leads the investing group High Dividend Opportunities where he teams up with some of Seeking Alpha's top income investing analysts. The service focuses on sustainable income through a variety of high yield investments with a targeted safe +9% yield. Features include: model portfolio with buy/sell alerts, preferred and baby bond portfolios for more conservative investors, vibrant and active chat with access to the service’s leaders, dividend and portfolio trackers, and regular market updates. The service philosophy focuses on community, education, and the belief that nobody should invest alone. Lean More.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such 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.

Treading Softly, Beyond Saving, PendragonY, and Preferred Stock Trader all are supporting contributors for High Dividend Opportunities. Any recommendation posted in this article is not indefinite. We closely monitor all of our positions. We issue Buy and Sell alerts on our recommendations, which are exclusive to our members.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (91)

Great day today !
Rida Morwa profile picture
@Take&run Very nice market day indeed
@Rida Morwa I’ve gone big on LVS when it hit bottom and have already made a ton on United airlines . I was just in Vegas and although masked, I have full confidence Vegas will come back big !
SPX or its future /ES will go 4150 area in two weeks , market needs a flushing down to hit bottom !
@1575 Flush twice to $4,090.... would be 10% off the recent high of $4,545.85
The biggest problem with this optimistic view on the market, is that it does nothing to address the effect of constricting supply chain capacity, and global supply shortages that are going to hit the market in the near term. Prices will be forced considerably higher. That in conjunction with increasing energy shortages, and energy led manufacturing shut downs in China, will force prices even higher.
@MikeM856 fair point but I think to look at other segments is the key which wouldn’t be directly affected
jerseyvalueinvestor profile picture
"Income-wise, we had one of the greatest September months where we collected about 30% of our yearly dividends."

How is it possible to collect 1/3 of all your annual dividends in 1 month. Are many of your stocks annual payouts once a year in sept? I dont get it
Liquidity will be lowered. Extreme price pressure in slimst all commodities. Slowing profits. Spreading default in China. CB more hawkish. But the fed will save us so keep bullish. What are you smoking man.
Yeah, I might dig into some utilities and consumer staples amid this inflation scare.
Rida Morwa profile picture
@Gladiator321 Good thinking, unregulated utilities can often adjust faster than regulated ones.
High Yield Cash Flow profile picture
The secret to my high yield cash flow is to buy-low and collect the dividends to invest in future cash flow investments. Having patience is a virtue in this market. Joe HYCF ;-)
Another buying op today - how fortunate!

Yup. I've been nibbling on down days too
PendragonY profile picture

Yesterday was a down day? Hmm, I was up (not a lot, but still up).
I am not sold on the idea that there is going to be a great rotation out of growth stocks. A sharp price correction certainly, but not a rotation away. Growth stocks tend to be disrupters of old tech eg tech that simply won’t survive the new green area, as well innovators of new tech like smart phone apps, Saas, Iaas and so on. Once valuations get real investors will have no choice but to hold these stocks or face underperforming the market over the medium to long term.

The point you made about total market ETFs and FANG stocks (weighting) is also the reason why FANG stocks valuations deviate from fair value, often significantly and can stay that way for some time. When cash flows in or out of ETF or there is a market correction (up or down) the manager has to buy or sell large quantities of FANG/large market cap stocks to ensure the fund tracks the index. The higher the market cap the greater the volume of shares that have to be bought or sold. This can create a shortage or an overhang of shares available in the market. This is a relatively new phenomenon (since ETFs are a relatively new concept) and I don’t think investors and some old school analysts fully appreciate the ETF affect on market data.
Hachilio profile picture
Thanks for the article. Very good. I prefer rates not stay this low- I would like savings account to pay interest, and for companies to not over-leverage into bankruptcy.

So I’ve been steadily buying stocks on the aggressive side. And paying off debt on the defensive side. With what is left over - I invest in my home and my happiness!
Rida Morwa profile picture
@Hachilio You are very welcome, sounds like you have a good plan you are following
I've never personally paid any attention to what month it is in regards to my stock market investments and my buying/selling decisions. I've found January thru December to be an equally great time to make investment dollars over the course of my 30+ years in the market.

That said, and since my September brokerage statements were just posted in my account, I decided (after reading Rida's piece) to take a look at my monthly change in value numbers. Could the 9th month of the year been a bummer without me realizing it as the 4 week period passed? An increase of $331K for the month means I'm lovin' September just as much as the prior 8 months of 2021. :)
PendragonY profile picture

In the aggregate September tends to be a bad month. But that doesn't mean that every stock and portfolio is down. I did okay (better than the market anyway) in September. You seem to have done very well. Congratulations.
Ibberman profile picture
@heresthewire I felt good about $45K until I read your comment. 👀
@PendragonY No question that "performance varies from portfolio to portfolio". My September was especially profitable thanks to my investment in what was a $2 stock (AEHR) that is now trading in the low teens finance.yahoo.com/...

So, while some of my investments had a "red" September my overall diversification led to a nice gain for the month. Thanks for the congrats. :)
Mister Doom profile picture
Too optimistic…..
@Mister Doom why am I not surprised on your comment based on your name 🤣?
Buy the dip ! I just bought 69 Tesla
Rida Morwa profile picture
@omarakthar Buying the dip can often result in additional income - so long as what you're buying pays dividends
@Rida Morwa there are a lot of quality stocks out there at their lows with nice Divys . I’m going to pick up more Hormel !
@Rida Morwa True, And while I fully agree on the dividends bit, even sans dividends it can also pay off if you later sell on an upswing. Depends on the company and where it's going to go.

Dividends are the "safe" or "conservative" means of making money on the market but it's not the only way and more power to those who make it the other ways.
Alternative Investing profile picture
What are the ytd results for the HDO portfolio in terms of actual income dollars (vs LY income $) and in TR?
Rida Morwa profile picture
@learning to be patient with mr mkt we update our returns here for those looking for a historical record: www.1hdo.com/...
Alternative Investing profile picture
@Rida Morwa thanks are these ytd results thru September 2021? And could you address the income only (divs,distros,cap gains from any sells) component comparison vs LY in real dollars
Brute80 profile picture
Hi Rida, thanks again for another informative article. I was just wondering, if you feel small cap cyclicals are what is set to outperform during the next 12-18 months, would this be what the Russell 2000 primarily consists of? Thanks again!
Treading Softly profile picture
@Brute80 As a whole we have leaned more towards diversified CEF vs any one specific holding or ETF
I know most people following here are dividend stock owners. I would like to point out that during dips and high volatility, option premiums are, at a premium (pun intended).
The high premiums allow you the opportunity to sell far out of the money covered calls on your dividend stocks, and still earn very good premiums to supplement your ROI.

IF the covered call is in the money at expiration day, you can "buy to close" the covered call, at a loss, and simultaneously "sell to open" a covered call with an out of the money strike, with a far enough away expiration to earn a net credit.
A word of caution, don't sell a covered call with the expiration day in the same week as the ex-div. date. This is when you are most likely to get exercised early.
You need not worry (too much) about losing your shares of stock, when you know how to roll and to avoid placing expiration day in the same week as the ex-div. date.

If you are considering adding to your shares on the dip, instead of placing a limit order, you may want to consider selling a cash secured put, at the strike price you would like to buy the stock. You get PAID a premium to buy the stock, at the price you want to pay.
You may ask: What if the stock doesn't come down to my strike price on expiration day? I will lose the opportunity to buy the stock at a lower price.
Answer: You also lost the opportunity to buy the stock at a lower price when you placed a limit order and the stock never dropped to your limit price.
The difference is, with a cash secured put, you earned a premium.
Knowledge IS power, only IF you apply that knowledge.
Rida Morwa profile picture
@Make good choices Many HDO members make extensive use of options to boost their incomes. I personally do not use options in our Model Portfolio to make it as friendly as possible to as many investors as possible.
We have an entire chat room dedicated to Non-HDO holdings and Options trading that is very lively.
@Rida Morwa Thanks for the info. How do I access this chat room?
Rida Morwa profile picture
@Make good choices Once you have joined and have access to chat - on the left side is a list of our various chat rooms for our members.
John R. Clark profile picture
Last year in the pandemic a friend of ours bought a new crew-cab pickup truck. He volunteered for extra teaching at school and earned enough to pay off the truck in 16 months with $12,000 left over.

Guess what our man just spent all of it on? Dividend stocks --- 12 @ $1,000 each! He plans to buy more every month with the ex- double truck payment that he's learned to do without. This while still adding to his 403(b) account with the district.

That truck was rather an extravagance but our friend, who comes from a family of wastrels, has uses for it with his craft skills. Now that it's paid for, he is applying his learned thrift and knowledge to build lasting income streams.

I learned years ago to commend people for doing big things right, even if their choices aren't the best in someone else's opinion, and especially in view of past errors and neglect. Ten years ago this friend often had to borrow from my wife and me just to keep up between paydays. (He's still a friend from repaying us promptly and fixing things at our house.)

Now when he comes to visit we're glad to hear of his plans and progress one month at a time. Thanks for reading!
Rida Morwa profile picture
@John R. Clark Thank you for your comment.
PendragonY profile picture
@John R. Clark

Thanks for sharing the experience of your friend with us.
Tbone-of-ILL profile picture
Thanks Rida,
You are one of my favorite Writers.
Your advise seems to be reasonable and spot on to this amateur investor.
Having recently retired, how and what % should I transition into High Dividend Stocks. Have about 500K in Mutual Funds mix in the following amounts. 19% International, 27% small Cap, 12% Mid Cap, 42% Large Cap. Not sure if it is better cash out all and dollar cost average back in?
Rida Morwa profile picture
@Tbone-of-ILL You are very welcome, thank you for your kind words. I am entirely invested in high dividend opportunities between stocks, bonds, and preferreds. I provide weekly insights like this to my HDO member community and a Model Portfolio that's designed to help them mimic my personal portfolio and our success. My public reports will continue to be released but to get a full view, joining our community may be the best jumping off point for you.
Phil in OKC profile picture
@Tbone-of-ILL A couple of years before I retired, I joined HDO. To start building my HDO portfolio I rolled over my current 401K into a Rollover IRA, which gave me access to the entire HDO Portfolio. I continued to max out my 401K and when I retired I rolled it over again into my IRA. The mutual funds in my 401K were OK for building up investing capital, but I had decided to build an income portfolio, where I would not have to cannibalize my capital.
Tbone-of-ILL profile picture
@Phil in OKC Thanks for comment
The market undercurrents have been in a rolling sea of red since June. The Russell , yes it was down less in September but it has been down 10% since June with about a third actually in bear market territory. Fixed income down and CEFs, whether equity -fixed income , have been hit pretty hard the last few weeks too! As well as utilities and REITS. In fact I believe almost half the S&P has been in correction territory for a while too. And let’s not even talk international with the dollars strength. Precious metals-horrible! A disciplined and diversified portfolio is not looking so rosy this year at all. But being in CEFs and stocks with between 4-9% distributions and dripping them and averaging down is gonna move the needle when the dust settles. Inflation and higher rates will help leveraged loan funds -BDCs and ultimately REITS and utilities-which don’t perform as bad as people perceive in a rising rate environment. Those that sell now don’t realize those sectors add ballast to a portfolio. The last 2 big crises-the housing meltdown and Covid , REITS have bore the brunt of. This I believe skewered the sectors long term performance.
Rida Morwa profile picture
@Sane Man Thank you for commenting and sharing your views. REITs were definitely impacted by the GFC and COVID. Many lower yield REITs are viewed as bond alternatives and as such higher Treasury yields puts strong pressures on their market price. This is why I invest higher up in the yield curve in excellent opportunities.
BM Cashflow Detective profile picture
High volatility?

A little too general.

Buy with confidence in the face of downward volatility.

... and get wealthy with upward volatility.

Volatility comes and goes, but big gains always ahead.

The normal work of a value investor in an environment of high volatility.

But the causal factors that actually drive this bull market are also there all along.

Entrepreneurial ingenuity and cash flow-oriented corporate management.

As long as these factors are visible, I don't worry. No matter what the Fed does.

Notice. Endogenous characteristics of companies always beat the exogenous factors of politics.

Real assets with "idea rich" backgrounds that satisfy people's needs are the key to prosperity.

The real reason we are in an ongoing bull market.

Even the Fed cannot prevent that. Because that is timeless as long as there are people with ideas. They will always find a solution for every problem that comes up.
@BM Cashflow Detective So what are some of the equities you like these days?
Rida Morwa profile picture
@BM Cashflow Detective Thank you for sharing your opinion.
BM Cashflow Detective profile picture

For example, I currently like and own:


...to name some high yield and DGI stocks.

I recently combined these with $AMZN and $FB.

Growth and dividend stocks together works very well for me.
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