Dear Mr. Berko: A little over three years ago, when I was 67 and ready to retire (my wife had retired a year earlier), I wrote to you about my 401(k), my wife’s 401(k) and our individual retirement accounts, which totaled $536,000. You told us to get out of both 401(k) plans, as well as our IRAs, because they were all invested in the same poorly performing mutual funds. We were fortunate to find a good stockbroker, and now our retirement accounts are worth $741,000. But the business news on TV, in magazine articles and in newspaper stories is telling us that stocks are too high and that the stock market is going to take a huge drop, and we’re frightened. We depend on our quarterly dividend income to pay our bills. Some stock market professionals write that we should sell everything and move to cash because the market will crash. In the past few months, we’ve talked to our broker several times, and he continues to tell us that we have good stocks and we shouldn’t worry. He said that the market will fall but that the stocks we own will come back and that the dividends are safe.
Would you advise us to sell now and take our gains and then, after the market falls, buy those stocks back? We trust our broker, but we’re still scared and nervous, and we would like your opinion, which would mean a lot to us. I’ve enclosed our most recent monthly statements so you can see what we own. — JL, Fort Walton Beach, Fla.
Dear JL: Yep, the market’s going to fall — and it will fall big-time, too. As certain as God made little green apples, it’s going to happen. And it’s going to happen when we least expect it to happen. The market will fall by several thousand points or more, and it will be so scary that some of us will have laundry problems. But there are only six people in this business who know exactly when the market is going to fall and by how much. And unfortunately, they won’t share their knowledge with me, so I can’t credibly advise you about when to liquidate your portfolio or when you should repurchase your shares. But I can tell you that your broker is a darn smart professional. This broker has composed a good, solidly structured income and growth portfolio for you that I’d be proud to own. Please do not sell a share.
Many of your stocks — including Johnson & Johnson, AT&T, NextEra Energy, Royal Bank of Canada, Boeing, IBM, Dominion Energy, OGE Energy, W.P. Carey, AmeriGas and JPMorgan Chase — are among the best blue chip and pale blue chip issues on the planet. When the market falls, those issues will fall, too, but be comfortable knowing that their dividends will remain solidly in place. Be mindful that each of your issues has an impressive record of annual dividend growth, and those dividends have increased in falling markets, as well as rising markets. Since 2000, the stock market has had some nearly shattering declines, as well as epochal recoveries. And during those volatile periods, the companies you own have fallen with the market, but even as their prices declined, they increased their dividends. Every one of the issues you own has more than doubled its dividend payout in that 17-year time frame. In fact, Johnson & Johnson, W.P. Carey, Boeing, Emerson Electric, Genuine Parts, Chevron, AT&T and others you own have increased their dividends every year for at least 25 years. And in that time frame, there have been some seriously grim declines that even made Warren Buffett blink.
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I understand your anxiety. But consider yourself fortunate to have excellent investment advice you can trust. So hang tight; stay the course; hold fast; and trust your broker, who certainly stands tall above those brokers who only know how to peddle annuities and high-commission proprietary products. Then be comfortable knowing that every time the market crashes, it recovers. And every time the market recovers, it recovers higher than its previous high.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at firstname.lastname@example.org.