The dividend yield is an often overlooked metric when attempting to determine what and when to buy in the stock market. Currently, after the huge run in stocks in 2009, the yields are very low. This means two things. First, it means your return on your money is not very good. Second, it means that you’re potentially buying at a overinflated price which means your risk of loss is potentially higher.
For me, I have a significant chunk of my portfolio in cash as I wait more attractive buying opportunities. I’m young and I have a very long term perspective; therefore, I’m willing to be patient. Patience, it seems, isn’t something that is valued anymore in the stock market. If you’re holding cash, you’re often ridiculed for not being 100% invested at all times in the market. This is ludicrous in my opinion.
Watch the dividend yields. They will tell you if and when it’s a great time to buy.
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