During a bull market, many investors say they can't wait for a pullback.
That might seem silly, but it actually makes perfect sense.
The truth is, those investors are not in it for the short-term gains. Instead, they're looking for opportunities to put more money to work for the long-run.
To do that properly, many would prefer share prices stay lower, for longer!
Just ask Warren Buffett.
As quoted by USA Today recently, the billionaire investor said (my emphasis):
"Anytime stocks go down, as far as I'm concerned, I like it because I'm a net buyer of stocks… We are a more aggressive buyer when they are going down."
Well, it seems many smart investors have taken the lead set by Buffett and put that theory into action in recent weeks.
The market endured what was the worst start to a calendar year in history at the beginning of 2016.
There was no shortage of concerns facing investors…
Plunging oil prices, concerns of a hard-landing in China and speculation of another recession in the United States, to name but a few…
The way I see it, all share market investors fit into one of three groups during this period:
1) Investors who fled the market…
These were the investors who were unable to gain control of their emotions.
Investing can be a tough gig, and not everyone is cut-out for lasting the duration.
But with all due respect, those investors who did sell in a state of panic are the most likely to have lost money for doing so…
2) Investors who stayed strong…
These investors remained composed through what was, for many, a pretty scary time.
Share markets around the world were getting pummeled, and the financial media were not helping the situation.
Fear and bad news sell, after all, and the media companies are always happy to oblige.
Investors who fit into this camp most likely tried to switch off from the markets altogether, reminding themselves that the volatility would end, eventually…
The third set of investors went one step further.
Rather than joining the panic, or merely sitting on the sidelines…
3) These investors were proactive.
They weren't sitting idly by for others in the market to come to their senses.
Rather, these individuals took advantage of what they sensed to be a typical market over-reaction.
They bought shares while they were languishing at levels not seen in more than two years.
Indeed, the S&P/ASX 200 (ASX: XJO) hit a low of 4,706 points on 10 February 2016, its lowest level since July 2013…
Since then, however, it has rallied 460 points, or nearly 10%.
In fact, it's currently sitting a mere 2.4% below its level at the beginning of the year.
Over in the United States, the S&P 500 in the United States has even climbed into positive territory for the year, and there are signs shares could climb even further in the coming months.
So much for that infamous "Sell everything" warning from the analysts at the Royal Bank of Scotland, or the calls for the second coming of the Global Financial Crisis from various bears…
There are always plenty of reasons to not invest in shares
The sell-off at the start of the year was by no means unique.
There are always hurdles to overcome when investing in shares, and you never have to look too far to find someone warning of the next big crash.
It's like the old Paul Samuelson quip that economists have predicted nine out of the last five recessions.
Even a broken clock is correct twice a day. Sometimes the 'experts' will get it right, but otherwise they're just adding to the normal noise of the market.
Of course, given the various uncertainties facing the market right now, some investors will choose to wait it out… choosing to get back into the market when the outlook becomes clearer.
But they could be waiting a while…
And when these uncertainties clear up, there is no doubt that another fresh set of uncertainties will take their place.
Another problem with waiting, as we've seen in recent weeks, is that by the time the next pullback occurs, the market could already be sitting considerably higher.
It might seem impossible right now, but maybe it will even soar toward the 6,000-point mark.
And if it does, it is clear which of the three groups of investors highlighted above will be kicking themselves, and which of the groups will be grinning from ear to ear…
A $19 billion dividend windfall…
Speaking of which, investors will have a great opportunity to put some additional money to work in the very near future!
As was reported by The Sydney Morning Herald on Monday…
"About $19 billion is about to begin flowing into the pockets of shareholders in the form of dividend payments after a bumper company profit season."
That's right… Not only did ASX-listed companies produce far better earnings results than were expected in February, they also announced a windfall of dividends.
Shareholders of Commonwealth Bank of Australia (ASX: CBA), for instance, are pegged to receive $1.98 (fully franked) for every share they hold on Thursday March 31, just after the Easter break…
If by some chance you don't own Commonwealth Bank shares, then there's a good chance that either Telstra Corporation Ltd (ASX: TLS) or Woolworths Limited (ASX: WOW) will make up part of your share portfolio.
Telstra will pay its 15.5 cent fully franked dividend a day after Commonwealth Bank, while Woolies' shareholders will receive 44 cents (also fully franked) per share a week later.
These are three of Australia's biggest and most widely-held companies. Therefore, you can be sure these dividends are getting distributed far and wide…
And what happens if you don't own shares in any of these three companies?
Suffice to say, you're not out of luck…
The SMH also noted that a record 91.2% of listed companies that reported during February chose to pay a dividend. And more than three-quarters of them either increased or at least maintained their dividend payouts!
It's not too late to join the proactive group of investors mentioned above…
Now, some individuals will no doubt take these dividends and run.
Maybe they'll put them towards the weekly grocery shop or perhaps towards an international holiday – especially now with the Australian Dollar bouncing around the US76 cent mark…
But the smart investors won't remove a cent of their dividends from their brokerage account…
Instead, they'll reinvest the proceeds.
They might buy shares in a new company, or maybe they'll simply top up on an existing stake in their highest-conviction positions!
Personally, I like Telstra at today's prices, and Wesfarmers Ltd (ASX: WES) is attractive too…
But for the most part, the best opportunities lie outside of the typical blue chips…
