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Timing the Market vs. Buying a Quality Company at any time

These past few months, I’ve been saving my money and just using the dividends I’m receiving to pay off my margin loan because I think the market is quite high now and due for a correction. I also haven’t added any new positions or purchased any shares of the stocks I already hold for the same reason. Except now, I’ve basically paid off my margin loan, my emergency fund is fully funded and I’m just collecting cash, both in my brokerage account and in my regular bank account from my job here in Korea. That really is no problem, except that the market keeps going higher and higher, without an end in sight and when my money is earning less than 1% interest, it’s not being put to good use.

Which makes me consider buying quality companies, even when they’re more “expensive” than I’d like them to be. Buying a company like Coke, Mcdonalds, Procter & Gamble or Chevron is not terrible at this point because these companies will keep increasing their dividends year after year quite reliably, and their earnings will keep increasing as well. My only hesitation is that if I waited until a big pullback, I could pick these stocks up at extremely cheap ratios, which means that when I sell them at some point in the future, my profits will be even bigger.

What to do???

2 Comments

  1. I am stuck in somewhat of the same dilemma: I have cash and am waiting for a market pullback, but I just see the market going higher and higher. The majority of my money is still in long-term companies like the ones you mentioned, but I am increasing my cash hoard with every quarter the market keeps going up. As long as we are patient the market will reward us eventually, but there is one company that could profit from both a continued uptrend or a market crash: Fairfax Financial Holdings (FRFHF). Prem Watsa manages the company’s money, and he’s got their investment portfolio fully hedged against a market crash. The stock will still go up if everything else keeps going up, just at a slightly slower pace, but it will spike if the market drops down into a recession. Prem Watsa did this in 2008, too, and you can see in the chart that Farifax spiked up when the market plummetted. If you want to know more about it feel free to read my article on it on my blog from a couple of days ago.

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