Tuesday, September 27, 2016


I have stopped reinvesting dividends on all individual stocks, stock funds and bond funds for the time being, for three very good reasons.  For one, we are nearing the November elections and a new president will take over at the first of the year.  Regardless of who wins the election, historically we will be faced with at least a two year period of a sagging stock market.  Reason number two, the Federal Reserve seems intent on raising interest rates which will adversely affect bond funds and rate sensitive stocks, at least for the short term.  The third reason has to do with the aging bull market.  Stocks are historically overpriced right now and some sort of correction is due any time.  So reinvesting dividends at today's stock prices seem contraindicated to me.

My plan is to collect the cash dividends until I see how everything plays out after the first of 2017.  Should we see a correction in the market, I'll have a cash reserve built up to take advantage of lower priced stocks.  Should the Feds raise interest rates, shares of the bond funds I hold will drop in price, also allowing for me to purchase more shares at a better price.  If none of these things should happen, then I'm left with a chunk of cash I can put to work however I see fit.  I'll still be building monthly cash flow through additional cash purchases between now and the first of the year.      

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