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  1. Default Do New Domestic Highs Indicate Investors’ Return to Stocks?

    Although it seems hard to fathom, on Thursday the major market averages — the Dow, S&P 500 and NASDAQ Composite — all closed at record highs. The last time that happened was on December 31, 1999.

    Yes, we are in a confirmed bull market. The interesting thing, however, is that investors as a whole still remain woefully underinvested. That’s the opinion of Raymond James strategist Jeffrey Saut, who exclaimed as much in a recent CNBC interview.

    Like Saut, I’ve spoken with many subscribers to my newsletter, as well as current and potential clients of my money management firm, and the overwhelming feeling I get here is that investors still largely hold high cash positions.

    Yet given the current new highs across the board right now, the logical question is whether it is time to pile into stocks?

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    In fact, if you aren’t already in the market, you need to approach things with extreme caution. There are multiple reasons why, but let me outline a few of the biggest reasons right now.

    First, all-time highs are usually followed by at least a modest profit-taking pullback. History makes buying at new highs usually a losing proposition, at least in the short term. I would much rather wait for a pullback off of current levels to start reallocating a lot of capital.


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    Third, we have the headwinds of seasonality, complacency and too-exuberant sentiment. Seasonally, we are still in the middle of the dog days of summer, a traditionally slow, low-volume time of the year for markets. On the complacency front, we have investors that are not really too worried about a correction. Finally, we have market sentiment that seems far too ahead of itself on the bullish side. In such instances, this usually indicates a turn is near.

    Now, one way to approach this market if you are woefully underinvested is to employ a technique that my dad, Dick Fabian, taught me years ago. His solution to the problem of buying at all-time highs, and/or after a market has run up substantially, is a strategy called increment purchasing.

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    After you’ve put that first third to work, if the market moves up less than 5% during the next 30 days, then you should put the next third of that money to work. Apply this formula to the final third of your money, and in 60 days you’ll have put that money to work via increment purchasing.

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    If, however, the market rises more than 5%, pulls back significantly from your buy point or falls below the 200-day moving average, then you would not put that money to work.

    This increment purchasing strategy is perfect for investing when markets are at all-time highs… and when the foundation of those highs is threatened by strong headwinds.

    If you want to find out how best to buy into the current new highs in the broad domestic market, and in other markets riding the current bullish wave, then I invite you to check out Successful ETF Investing today.

    ETF Talk: This Global Dividend Fund Provides Diversity, Balance

    Our series on internationally based income funds continues this week with an examination of the SPDR S&P Global Dividend ETF (WDIV). Some overseas markets have been performing well this year, while others have lagged, but even the markets less favored in the current climate may see a change of fortune.

    If you’re willing to take the risk of investing in a sector of the market that still is dealing with the surprise Brexit vote, in which U.K. citizens chose to leave the European Union, then buying shares in a dividend-oriented overseas fund may be a good way to hedge out some of the inherent risk. The dividend aristocrat companies consistently raise their payouts and give the fund a reliable and growing source of income.

 

 

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