You can’t grow long-term if you can’t eat short-term. Anybody can manage short. Anybody can manage long. Balancing those two things is what management is. Jack Welch
In this month’s reflection section, we looked at short-term fluctuations in a portfolio. It hurts to look at a statement and see a decline in your assets. The statement is a snapshot of your financial assets at one point of time, you cannot see the potential in the portfolio. A case in point was a portfolio that declined for 3 consecutive months. Before the next statement arrived, the portfolio had fully recovered the losses from the previous months. If you need the funds near term then a short-term decline can be devastating. If you are saving for years ahead then a few weak months may not have any impact on the value of your portfolio when you need the funds.
We continue to focus on purchasing companies with, what we believe to be solid long-term prospects. We tend to prefer dividend paying stocks that continue to pay income despite the market fluctuations. The past year of rising interest rates has put pressure on the price of many dividend paying stocks such as the banks and pipeline companies. One factor we like is not just the yield, but the potential for the company to increase its dividend over time. Over the past year we have seen the beaten-up banks and pipelines increase their dividends. This gives us confidence in the long-term investment returns on these stocks.
