When starfund manager and long-time Fool hero Neil Woodford shouts Fire!, it is time to check out where the exits are. This is the man who sawhow highly flammablethedotcom and banking booms were,years before they burst into flames.
Similarly, if you spot Woodford running towardsa burning building, it is time to stop panicking and check out what hes up to. That is pretty much what he has been doing in recent months, rushinginto the market while others arerunning away. In an interview with the Daily Mail, he said concern over falling stock markets has triggered hugeswings in share prices, and thatis when helikes to buy.
This broadly reflectsour philosophy at The MotleyFool: we actuallylike it when stock markets fall, as it gives us an opportunity to load up on our favourite companies at bargain prices. When the FTSE 100 dippedbelow 5900 this year and the news bulletins were crying Panic!, we ran article after article saying that now is the time to keep your cool and go shopping for cut-price shares.
Everybody loves a bargain, with the exception of private investors. They feel saferbuying when markets are riding high and shares are overpriced, because it help them make the leap of faith that every share trade involves. At the Fool, we prefer to buy when markets are down, sentiment is falling, and our favourite companies are suddenly cheaper than they were.
It is a hard philosophy to put into practice. People have learned to fleetrouble for soundevolutionary reasons. When the FTSE 100 slumped after Black Monday I found myself beset with lethargy, and had trouble persuading my finger to click the Buy button to top up my FTSE 100 tracker. Im glad I did itis up nearly 9% since then.
Even Neil Woodford doesnt know where markets will go next. Nobody does. What you can do is look for companiesthat areundervalued by themarket but still have attractive products and loyal customers, and offer investor treatssuch as generousdividend yields. Then you buy themwith the aim of holding until the market discovers their true value. While you wait the share price to recover, you build your positionbyre-investing your dividends for growth.
Time To Buy
That is more or less what Woodford does. The top holdings on his hugely popular CF WoodfordEquity Income fund include familiar FTSE 100 favourites such as pharmaceutical giants AstraZeneca and GlaxoSmithKline, Imperial Tobacco Group and British American Tobacco, BT Group and Legal & General Group. Solid, established companies with strong track records, progressive dividends and a ready-made marketplace.
These are they type of companies that Woodford is buying today. If you think it is hard to part with your money in thistroubled market, youre not alone. I feel the same way. Neil Woodford doesnt. He thinks today is a great time to buy. And history shows that he has been right far more often than he has been wrong.
There areplenty more great dividend-yieldingstockson the FTSE 100 if you know where to look.
This special report Motley Fool wealth creation report,top FTSE 100 stocks that could help you retire in comfortshows how dividend stockscouldmake you super-wealthyover the years ahead.
The Motley Fool’s 5 Shares To Retire Ondon’t just offer long-term growth, but juicyyields of more than 4% as well.
If you’d like to find out the identityof these five top companies, and how their shares could fuel yourretirement, simplyclick here nowfor instant access.
Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.