Are You Being Left on the Sidelines?

By Selena Maranjian | More Articles
October 9, 2009 | Comments (11)

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Are you worried? If so, you're not alone. The folks who run the "Wealth Hazards Worry Index" have just released their September results, and they show that the number of people who are afraid of being left behind by the economic recovery has shot up from 31% of respondents to 46% since August.

Why the sharp rise? Well, it could be that while we're finally seeing signs of an economic recovery, many people may not feel any improvement in their own lives. It could also be that people know they're sitting on the sidelines. Check out the following not-so-obscure companies, for example, and how they fared in 2008 and in 2009 so far:

Company	CAPS Stars (out of 5)	2008 Return	2009 Return, Year to Date
Corning (NYSE: GLW )	*****	(59%)	64%
Nike (NYSE: NKE )	***	(19%)	27%
IBM (NYSE: IBM )	***	(20%)	47%
Research In Motion (Nasdaq: RIMM )	**	(64%)	69%
Altria (NYSE: MO )	****	(30%)	25%
Starbucks (Nasdaq: SBUX )	**	(54%)	116%
Coca-Cola (NYSE: KO )	****	(24%)	23%

Sources: Motley Fool CAPS, Morningstar.

Clearly, there's some kind of widespread stock recovery in progress. And while some of us are benefiting from it, as we see our deflated 401(k)s and brokerage accounts start plumping up again, others sold out in a panic after the market imploded last year and have yet to get back in. Imagine if your $10,000 investment in Starbucks dropped to $4,600 after 2008, and you sold. You'd have missed seeing it rise all the way back to $10,000. Similarly, a drop in Corning from $10,000 to $4,100 would have corrected back to $6,600 -- for those who hung on.

How not to miss out
You won't miss out on the recovery if you participate in it. Long-term money has a good chance of growing significantly over long periods, if left in the stock market in funds or stocks you believe in. In the short run, yes, anything can happen -- but for most of us, it's the long run that really matters.

Be proactive elsewhere, too. Look into converting your retirement plans to Roth IRAs if it makes sense for you -- a rare opportunity is coming up. If you've been out of work, crank up your job-search efforts, because some companies are or will soon be hiring. Try to save and invest more, too, to take advantage of these extraordinary days, when so many great stocks are on sale.

Don't set yourself up to fail. Read what Paul Elliott has to say about the three things you need to overcome to succeed at investing.

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Longtime Fool contributor Selena Maranjian owns shares of Corning, Coca-Cola, and Starbucks. The Fool owns shares of Starbucks, which is a Motley Fool Stock Advisor selection. Coca-Cola is a Motley Fool Inside Value recommendation and a Motley Fool Income Investor pick. Try any of our investing newsletter services free for 30 days. The Motley Fool is Fools writing for Fools.

Read/Post Comments (11) | Recommend This Article (3)

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Report this Comment On October 09, 2009, at 12:25 PM, kbwoodrow wrote:

This makes sense given that unemployment benefits may be expiring for 400,000 people and it looks like the $ 8,000 tax credit for first-time home buyers will disappear as well. Wealth Hazards has got it right - their new book Wealth Hazards - Surviving the Recovery looks pretty good.
Report this Comment On October 09, 2009, at 2:06 PM, SageOrFool wrote:

Gold hit all time highs three days in a row this week, significantly indicating a severe bear market ahead. Cash is king and gold is queen.
Rim lost 20% in September amidst weak forecasts. It is possible for Rim to lose another 20 to 50% or even more in the coming quarters given the dim economic climates ahead.
Report this Comment On October 09, 2009, at 3:29 PM, kedo76 wrote:

SageorFool, great outlook. You should concentrate on cash. I just got my fat Altria dividend today, so I will concentrate on that and even if I do "lose" (relative term of course since I am not going to sell) on some MO equity those dividends keep rolling on in. I will keep right on buying STOCKS through this upcoming bear market and stop buying when you start buying in the next bull market (or I guess what should be renamed the bubble market). Good luck with that cash.
Report this Comment On October 09, 2009, at 3:43 PM, truthisntstupid wrote:

Right on Kedo
Dividend investors seldom lose. I never plan on selling either, as long as I figure the company will keep being able to send those checks. I'll be buying some MO next week. I too am a "permanent" dividend investor but I finally did start to feel stupid hanging on to my HOG stock for the 1.2% yield I was getting on my cost. So I am selling it at a loss because even though I'm taking a loss I can take the same money, buy MO, and get about 4 times the dividends. I should have done it before now. I'll be glad to be rid of it.
Report this Comment On October 09, 2009, at 3:56 PM, SageOrFool wrote:

Without further injections from the fed bailouts the macro economy may not sustain healthy dividends the likes of MO. Many players are weary of several 4 star bulls becoming 4 star bubbles. I share the same sentiments since the national unemployment rate is still too high, housing markets fluctuate weakly, sales of big ticket items still very low. This Christmas is the litmas test for the consumer market restarting, but given all the low inventory levels and lowered supply chain output this seems to be a sputtering market poised for lowering profits and at best bubbles deflating instead of popping. Rim is a beacon on this popping scenario, the September deflation of the Rim bubble still pegs Rim at double its price from its 52-week low of $35.
Report this Comment On October 09, 2009, at 3:58 PM, kedo76 wrote:

You know there's that old rule about being down 8% and selling to save yourself. I am not sure if it's a hard and fast rule (I am sure Warren Buffet would be horrified to know about it) but it seems to work out OK as a guide. Taking a loss isn't horrid (even though I guess it always is and should be viewed that way) as long as you rectify the situation with a purchase that nullifies the loss and gets you back in the game. MO is, man, been good since I obught. The equity is decent, but with their recent dividend increase, it's nice (all you have to do is leave it out of stock conversations since it seems to horrify everyone that you own it and just secretly collect your dividends!).
Report this Comment On October 09, 2009, at 4:00 PM, kedo76 wrote:

SageorFool, this Christmas is going to bite the big one. It is not a litmus test. It's going to another awesome buying opportunity when everyone is in the red and surprised and the stock drops. I would say a better litmus test is Christmas 2010.
You keep bringing up RIM as your stock guide which is too bad. If RIM was even one of the 20 stocks you look at as a guide, you'd still be lost.
Report this Comment On October 09, 2009, at 4:26 PM, SageOrFool wrote:

Kedo. Obama's plan is revolved on the high tech stocks. If I use AAPL instead of RIMM as beacon we should have a booming rebound by now, but that is not the reality, is it? Many are still stuck with toxic assets like Rim stocks. The sooner Obama can finish off the repairs on finance toxic assets the better it would be because there are just as many high tech toxic assets around sucking up VC $.
Report this Comment On October 09, 2009, at 5:51 PM, kedo76 wrote:

Sage, I understand that. I guess I am not sure why your answer is then to "get stuck on the sidelines" and stay in cash. Obama, shmobama; tech, shmech. You're going to get stuck on the sidelines becasue you sound like you're sticking with cash because of Obama and Tech instead of looking elsewhere, like HUN, for example.
Report this Comment On October 09, 2009, at 7:23 PM, truthisntstupid wrote:

1) Utilities rule
2) Companies other than utilities that have
A) A sustainable competitive advantage that you believe in enough to help you maintain the mindset of buying more when the price takes a dive
B) A free cash flow payout low enough to maintain those dividends even when the economy sucks
C) Market leader? Bonus!
D) Long record of dividend increases and good reason to expect it to continue.
E) Very good debt coverage.
These are the things that allow a dividend investor to look FORWARD to the next time the market crashes! We don't "average down" our cost basis. We "average up" our YIELD!
Report this Comment On October 09, 2009, at 10:00 PM, SageOrFool wrote:

I would only invest in companies that invest wisely in the future. Again, I guess companies like Research in Motion would be out of my portfolio.

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