Dog Days of Summer Stocks

August and September are not good months for stocks.  Whether stocks rally again this fall or not, we need to be concerned also that the Dow has broken its 200 day moving average three times since last fall.  This is an unmistakable sign of a market top even though some people may not want to hear that.

Is it time to go short then?  No, that won't work either because too many people want the bull market to continue, and someone once said that the market can remain irrational for longer than you can remain solvent.  So, you will be gored if you act too soon.

What I am doing myself is building positions in dividend stocks.  One stock is BLV, Vanguard's long term bond ETF.  It is up 15 percent since last fall in addition to a dividend of around 3.5 percent.  The management cost for you to own the ETF is also almost nothing.

Another stock that I own is Pimco's Income Strategy II Fund, PFN.  It is currently my largest holding.  It pays a dividend of around 8% per year, and you get paid part of that each month.  I love monthly dividend stocks.  Management costs are more than 1%, but I think the stock is very much worth owning.

I am working toward having a portfolio comprised of at least 50% quality dividend stocks so that I don't have to worry about stock market volatility.  It is okay to take some risk, but you need to be able to sleep at night knowing that half of your money is reasonably safe.