Should you cut down on stocks?
By Bob Moeller
WEAC Member Benefits
May 2008
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| By Bob Moeller
Integrys (symbol TEG) is the utility servicing Green Bay and surrounding areas. The old WPS utility bought out Peoples Energy, and changed its name. The old WPS paid a nice dividend and had never missed a dividend since 1856 (yes that is correct). The new company, TEG, on a combined basis, hasn’t missed a dividend since 1940. Dividends tend to increase every year. Currently (04/15/2008), the dividend yield is 5.6%. Guaranteed? No. Put all of your money into TEG? No. A good place for some of your money? You get 5.6% while you wait for the market to increase. Are there other companies like this? Lots of them. A good place to research is to go to the library, get the Value Line reference, look up utilities, banks, and Value Lines lists of dividend payers. You can probably buy TEG directly from the utility company itself, although I haven’t checked that out. Other Wisconsin utilities and their current payout rate:
• Alliant LNT 3.8%.
• Madison Gas MGEE 4.1%.
• WE energies WEC 2.3%.
• Xcell Energy XEL 4.6%. If you are married, before you even think about choosing a non-joint survivor annuity option, go to www.urs.org/dbplans/ pensionmax.shtml and read it carefully. |
By Bob Moeller
I have been getting a lot of questions from people concerned about the extreme volatility and downward movement in the stock market. The general stock market was off 9.5% from January 1 to March 31, as measured by the Vanguard Total Stock Market index. That’s a huge drop for three months.
Is it time to cut down on your stock holdings? Assuming you have taken reasonable care in selecting them, and the proportion of your portfolio invested in stocks is reasonable, the answer is no.
I suggest that most people should have a range of their age plus or minus 10% in stable investments and the balance in stocks (equities). So, a 40 year old would have between 30% and 50% in stable investments like CDs, fixed interest, bonds, etc., and the balance in equities. I also remind people that the most important thing is that you are able to sleep with your investments each night and you should never feel guilty about being more conservative.
Sometimes it’s surprising the stray comments you remember. When I was in New York decades ago training to be a stockbroker, it also happened to be a negative time in the stock market. One of my teachers, who actually was a trader on the floor of the NYSE for his day job, said simply “Of course the market is going to go back up. Why? Because it always has.”
Over time I realized that he had put a lifetime of lessons in that single comment. The question of course is how long will it take. I don’t know. But the lesson here is that nobody knows. I frequently remind people I am not psychic. But neither is anyone else. So I will limit my investments in speculations. I will increase my investments in income-producing situations (see my December 2007 article on Preferred Stocks). For example I just bought some Integrys (TEG) in one of my accounts. I believe investments in stocks that have reliable increasing dividends are a good place for some of your equity investments. For specifics on this one utility, see the sidebar.
Posted June 17, 2008