The Question of Timing In Value Dividend Investing

By its very nature, value investing tends to be at odds with timing strategies or "technical analysis" which attempts to discern the twists and turns of the market. There is the famous value investing mantra that "in the short term the market is a voting mechanism; in the long term the market is a weighing mechanism." However, the events of the last 12 years(the 2000-01 crash, the 2008-09 crash, the flash crash, and the last few weeks) make it almost impossible for an investor to ignore timing considerations. In an account with any kind of margin, a mistake in timing can lead to a wipe out. Even in unmargined accounts, enormous amounts of money can be gained or lost depending on the timing of purchases and sales.

The conservative approach is to focus on positions which are on the "it is irrelevant what other people think" end of the spectrum described above - bonds, preferred stocks, yield oriented stocks like BDCs, REITs, MLPs, and solid dividend paying blue chips. Of course, you should never exhaust your "dry powder" on one day or even in the course of one week or one month. But investors should have in mind a "nibble level" for stocks they are targeting and should start nibbling when the stock hits that level regardless of how bad it makes them feel.

Source: Seeking Alpha

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