I like little books.
The Little Book of Common Sense Investing (by John Bogle).
The Little Book that Beat the Market (by Joel Greenblatt and Andrew Tobias).
How to Retire with Enough Money (by Teresa Ghilarducci). This book is physically small, and chock full of retirement planning wisdom.
The idea is that there is a really big book, often filled with equations, graphs and footnotes that the little book takes, simplifies and condenses down into a version accessible to the layman. They aren’t for academics, they’re for practitioners.
And the Little Book of Sideways Markets (by Vitaliy N. Katsenelson) fits that bill.
The premise is concise: After an extended bull market there is often a disruption, a bear market and then a long period of time where the stock market doesn’t really trend up or down. It just goes sideways.
During that period, the market (really the mass of traders behind the market) acts strangely.
Some key points:
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Sideways markets last for years. Sometimes longer than a decade.
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In Bull markets, dividends only make up about 20% of the stock value growth.
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In a Sideways market, dividends make up about 90% of the stock value growth. (!!!)
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The S&P500 is a great investment generally, but given that is has a relatively low dividend payment, you might want to reconsider.
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In a Sideways market, it is basically value investing taken to an extreme degree. You need to nail the growth, value and quality trifecta. One of three is not enough.
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In a Sideways market, optimism is gone, and the result is that companies can do really well, and never see their stock prices move. This makes them great to work for, but awful to invest in. This is way different from the Bull markets we’ve seen for a while now, where no one wants to work for any companies, and everyone wants to invest.
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Don’t pay too much for a cow, you’ll just regret it in the long run, no matter how great the cow looks today, there is a limit to how much milk it can produce.
Extremely interesting read, well worth considering as we end up heading into what appears to be correction territory in the stock market. If you are interested in hearing more of Vitaliy’s thoughts on investing, you can hear him here or read his blog here.