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Buying Stocks "When You Have the Money"

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When asked when was the best time to buy stocks, legendary investor Shelby Davis would always reply, "When you have the money."

With both the Dow Jones Industrial Average and the S&P's 500 Index down for 2014, investors should follow the advice of Davis, a billionaire investor and fund manager. After all, Warren Buffett wrote in The New York Times about how bullish he was about the future of America in October 2008, the nadir of The Great Recession. He backed it up with massive purchases of General Electric (NYSE: GE), Goldman Sachs (NYSE: GS), and Bank of America (NYSE: BA).

All financial institutions, each was pounded during The Great Recession.

Related: China Continues Acquiring Foreign Energy Firms

The recovery for all has been rewarding for Buffett and other shareholders. Over the past year, Bank of America is up more than 40 percent. For the same period, Goldman Sachs rose more than 17 percent. General Electric is now trading higher by nearly 20 percent for the past 52-week period.

As detailed in many previous articles on Benzinga, it is always prudent to buy stocks that pay dividends.

Dividend income has provided 45 percent of the historic total return of an equity, according to John Bogle, founder of The Vanguard Group. With share prices falling, the dividend yields will be higher. That will result in greater total returns over the long term.

The global economy is improving, which is obviously bullish for the stock market.

Both the United States and China, the two biggest economies, are importing and exporting record amounts of goods and services. After a strong year in 2013, the financial markets will have to adjust to reduced Federal Reserve support. But that should not keep long-term investors from buying stocks "when they have the money."

Posted-In: Long Ideas News Dividends Wall Street Journal Global Economics Federal Reserve Media Best of Benzinga

 

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