Anyone in this market today, whether they're in it for capital gains or the income, has seen their accounts suffer this year. As of Friday's close, the DJIA is down 255 points, or almost 1.5%, since the beginning of the year. And unless those accounts received an equivalent amount in dividends, then the overall wealth in those accounts is decreasing. And that means that the typical investor would have been better off simply withdrawing their money and hiding it in the mattress.
So what kind of investor can make money in this type of market and still sleep at night? Dividend Growth Investors. These investors aren't particularly happy with what's happening in the market but they're the investors that bought stock in companies that had a history of growing their dividends. As long as those dividends continue to grow, they're not overly worried about the volatility of those individual stocks. They know that as long as the companies they invest in continue to increase the bottom and top lines and, more importantly, increase the dividend each year, they're on plan. And they're sleeping good at night. In fact most of the dividend growth investors are probably noticing the low prices and trying to figure out how to take advantage of those low prices by buying even more.
The other kind of investor that's making money in this type of market is the swing trader who's trading ETFs of the S&P500. Those ETFs have been swinging 2% - 3% each month. For those that are agile enough to make those types of trades it's been a very lucrative business.
For the most part I'm a Dividend Growth Investor with a philosophy of "Buy, Write, Collect" which outlines how I buy dividend growing stocks, write options against those shares, and then collect the dividends. But I'm also a swing trader with ETFs that mimic the S&P500 index. Knowing which system to use in which situation is the secret. For that I use momentum indicators. Any discussion of momentum indicators is beyond the scope of this article, but if you read a number of other articles listed in the INDEX section of this site you'll see some of the strategies I use that include momentum indicators.
Stocks Below Their 50 Day Moving Average
Stocks Above & Falling
Johnson & Johnson
Proctor and Gamble