My Favorite Long-Term Stock Investing Strategy

If you're going to build a stock portfolio over the course of several years, you're going to have to keep your emotions in check. Read More...

(0:45) – Dollar Cost Averaging: When Is The Right Time To Buy?
(4:30) – Market Timing: Learning From Past Down Markets
(14:45) – Tracey’s Top Stock Picks: Deploying Dollar Cost Averaging
(27:40) – Episode Roundup: [email protected]

Welcome to Episode #156 of the Value Investor Podcast

Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.

This week, Tracey continues with her series looking at Benjamin Graham’s best-selling book for value investors called “The Intelligent Investor.”

First published in 1949, the last edition by Graham was published in 1973. But in 2003, Jason Zweig, along with a preface by Warren Buffett, updated the book to account for the events of the last 40 years.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="How to Invest for the Long-Term” data-reactid=”22″>How to Invest for the Long-Term

There are a lot of strategies and techniques for investing for the long-term.

But one that doesn’t get much love is dollar cost averaging. That’s when you devote a certain amount of money on a specified date to buy stocks.

Many people with 401ks are already doing this strategy.

Benjamin Graham only devotes a few pages in the book to this strategy but it really should get more attention as it’s an easy investing method for most people to deploy.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Why Should You Dollar Cost Average?” data-reactid=”27″>Why Should You Dollar Cost Average?

1. It takes the emotions out of investing. When you are fearful it’s easy to panic and sell your stocks. But dollar cost averaging is automatic, no matter how volatile the market may be.

2. It prevents the “waiting for it to bottom” syndrome. That’s when investors wait on the sidelines as a stock drops as they wait to time it perfectly at the bottom. Market timing is hard and few do it well. Many investors never face their fears and end up not ever buying the stock at all.

3. It keeps you on track for your plan. Long-term investors should be looking at the long range future whether it’s 10 years, 20 years or even 30 years or more.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Dollar Cost Averaging Individual Stocks” data-reactid=”31″>Dollar Cost Averaging Individual Stocks

While many dollar cost average into mutual funds and ETFs, it can also be successfully deployed with individual stocks.

Most investors like to dollar cost average when a stock has declined or when it’s trading in a narrow trading range for an extended period of time and seemingly going “nowhere.”

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="1.       Square SQ could be a dollar cost averaging candidate. Shares are down 23% over the last year and not going anywhere. It’s also trading with its lowest P/E of the last 2 years.” data-reactid=”34″>1. Square SQ could be a dollar cost averaging candidate. Shares are down 23% over the last year and not going anywhere. It’s also trading with its lowest P/E of the last 2 years.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="2.       Keycorp KEY has fallen 24% over the last year as Wall Street has fled the regional banks. As a result, it’s cheap, with a forward P/E of just 8.8. It also rewards shareholders for their patience with a dividend yielding 4.7%.” data-reactid=”35″>2. Keycorp KEY has fallen 24% over the last year as Wall Street has fled the regional banks. As a result, it’s cheap, with a forward P/E of just 8.8. It also rewards shareholders for their patience with a dividend yielding 4.7%.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="3.       Comerica CMA, the big Texas and Michigan regional bank, has sunk below its December 2018 lows, as shares are down 39% over the last year. It’s now dirt cheap, with a forward P/E of 7.4. This bank is also paying a juicy dividend, yielding 4.6%.” data-reactid=”36″>3. Comerica CMA, the big Texas and Michigan regional bank, has sunk below its December 2018 lows, as shares are down 39% over the last year. It’s now dirt cheap, with a forward P/E of 7.4. This bank is also paying a juicy dividend, yielding 4.6%.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="4.       Delta DAL is down just 2.9% over the last year as the stock has mostly stayed in a narrow trading range during that time. That makes it the perfect candidate for dollar cost averaging. Investors also get a dividend which is currently yielding 2.9%.” data-reactid=”37″>4. Delta DAL is down just 2.9% over the last year as the stock has mostly stayed in a narrow trading range during that time. That makes it the perfect candidate for dollar cost averaging. Investors also get a dividend which is currently yielding 2.9%.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="5.       Apple AAPL shares have fallen 6.7% over the last year. Although they are well off the December 2018 lows, they are still a good candidate for dollar cost averaging. Investors get 1.5% for their patience.” data-reactid=”38″>5. Apple AAPL shares have fallen 6.7% over the last year. Although they are well off the December 2018 lows, they are still a good candidate for dollar cost averaging. Investors get 1.5% for their patience.

What else should investors know about dollar cost averaging?

Find out on this week’s podcast.

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