Buy and Hold Returns Buy, Hold, and Prosper. It was a slogan used by a leading mutual fund company in the early 2000s. It made sense at the time. And why not? From 1982 to 2000 the stock market had its best run ever. Had you invested in profitable, dividend-paying stocks and been patient enough to keep them, you would have made lots of money. My favorite example is Coca Cola - a successful blue-chip company with a long history of treating its shareholders well. It may not be the most exciting stock around, but who cares? Personally I don’t invest for excitement. I invest to make money – then I spend that money on things that are exciting (like fixing my teeth and laundry room cabinets). You could have bought Coke stock for under $5* in 1990. Ten years later it was trading at just under $29. That’s quite a gain, but it is only part of the story. During that same 10 years, its dividend (cash that they pay to investors every 3 months) quadrupled. Had you invested $10,000 in Coke stock in 1990 (and kept it), the company would be paying you over $2,800/year in dividends today. But along came the year 2000 and with it the end of the 18 year ‘bull market’. An investment strategy For nearly 10 years the stock market consolidated, and Coke was no exception. you can have confidence It opened in 2000 at $28.66 and closed out 2009 at $28.50. in… That’s not to say that Coke wasn’t still a good investment. After all, they did increase their dividend 10 times during this period. But for impatient investors who were also accustomed to a rising share price, it wasn’t enough. Some wanted more – and believed they could get it by trading more frequently. During the 10 years that began in 2000 Coke traded as low as $18.44 and as high as $33.44. The interesting thing was: it was following a pattern. Four times it rallied by 25% or more. But each time it would subsequently fall - by an average of 38%. It seemed like an easy thing to exploit. Sell the stock when it approached the high end of its trading range, and buy it back again after the next big decline. To heck with Buy and Hold. By 2009 even the media pundits were proclaiming it dead. But then things changed. Share prices began rising. There were still dips, but now they were shorter and shallower, and were followed by higher highs – much like the market of the 80s and 90s. As for Coke, not only did its dividend continue to increase (now 18 times higher than it was in 1990), but also the stock price kept going up – to levels it hadn’t seen in 15 years. For investors it has been a mixed bag: great for those who bought and held; but frustrating for those who have watched from the sidelines, waiting for the next ‘correction’. Jim Grant, CFP (Certified Financial Planner) is a Financial Advisor with Raymond James Ltd (RJL). This article is for information only. Securities are offered through Raymond James Ltd., member Canadian Investment Protection Fund. Insurance and estate planning offered through Raymond James Financial Planning Ltd., not member CIPF. For more information feel free to call Jim at 250-752-8184, or email at [email protected]. and/or visit www.jimgrant.ca This newsletter has been prepared by Jim Grant and expresses the opinions of the authors and not necessarily those of Raymond James Ltd. (RJL). Statistics and factual data and other information in this newsletter are from sources RJL believes to be reliable but their accuracy cannot be guaranteed. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. This newsletter is intended for distribution only in those jurisdictions where RJL and the author are registered. Securities-related products and services are offered through Raymond James Ltd., Member-Canadian Investor Protection Fund. Insurance products and services are offered through Raymond James Financial Planning Ltd., which is not a Member-Canadian Investor Protection Fund. .