What is the most common investor mistake? Trading–getting in and getting out at all the wrong times, for all the wrong reasons. You’ve heard it before: Most investors are their own worst enemies. My dad taught me this investing axiom at an early age. In fact, Dalbar Inc. documented it recently in a report available online called “Quantitative Analysis of Investor Behavior, 2012.” Google it, and you’ll see evidence from a 20-year study. Most mutual fund buyers, for example, badly lag the very funds they buy (and sell) because of bad timing. The average mutual fund holding period for equity or fixed income is only about three years. It’s too short. Moreover, in the last two decades, stupid switching into and out of funds has cost equity fund holders more than four percentage points in annualized returns and bondholders even more–nearly six percentage points.
The solution, of course, is to trade less. Buy into good, well-researched companies and then wait. Let’s call it a sit-on-your-hands investment strategy. Here are hand-sitters for consideration.
Britain’s HSBC Holdings (HBC, Financial)(54) has few rivals when it comes to providing broad, global financial services to small and midsize businesses. It trades at 15 times trailing earnings, 1.2 times book value and 4 times cash flow, with a 3.7% dividend yield.
Apple (AAPL, Financial)(461) is no longer beyond criticism. I like that. The world’s largest stock, it has a P/E of ten and sells for 3.3 times book value and 7.4 times cash flow. Its dividend yield is 1.8%. It’s a bargain among megacap tech stocks like IBM, Google, Oracle and Microsoft, and it’s a bargain among megacap consumer stocks like Amazon.com, Comcast, Disney and Nestle. Use Wall Street’s hypercritical mood toward Apple as a buying opportunity.
Continue reading.
The solution, of course, is to trade less. Buy into good, well-researched companies and then wait. Let’s call it a sit-on-your-hands investment strategy. Here are hand-sitters for consideration.
Britain’s HSBC Holdings (HBC, Financial)(54) has few rivals when it comes to providing broad, global financial services to small and midsize businesses. It trades at 15 times trailing earnings, 1.2 times book value and 4 times cash flow, with a 3.7% dividend yield.
Apple (AAPL, Financial)(461) is no longer beyond criticism. I like that. The world’s largest stock, it has a P/E of ten and sells for 3.3 times book value and 7.4 times cash flow. Its dividend yield is 1.8%. It’s a bargain among megacap tech stocks like IBM, Google, Oracle and Microsoft, and it’s a bargain among megacap consumer stocks like Amazon.com, Comcast, Disney and Nestle. Use Wall Street’s hypercritical mood toward Apple as a buying opportunity.
Continue reading.
