Sell the Hare, Buy the Tortoise?

By David Vomund

The tortoise has caught the hare.  Let me explain:  The Nasdaq 100 ETF (QQQ), led by the “Magnificent 7” technology stocks, gained an amazing 17 percent in the first half of 2024 and continued to rise through year end.  But it has since given back much of that gain.  Meanwhile the slower moving Invesco S&P 500 Low Volatility ETF (SPLV), which holds the least volatile S&P 500 stocks, lagged in 2024 but hasn’t retreated this year.  Over those 14 ½ months both returned 17 percent.   

For a long time financial commentators acted as if investors were losing money if they didn’t load up on technology stocks.  They weren’t losing money and now that tech stocks have dropped 13 percent in one month the returns are similar.  The tortoise might even pass the hare.    

With technology stocks falling farther and faster than others, the S&P 500 is weaker than most stocks.  Through last Monday, the S&P 500 had a year-to-date loss of 4 percent.  The average stock in the S&P 500, as seen in the Invesco S&P 500 Equal Weight ETF (RSP), is only down 1.5 percent.  In spite of the scary headlines, most large company stocks are barely down this year and many of the dividend paying stocks are up.    

Instead of selling everything like they do in severe bear markets, investors have rotated from the volatile and often over-hyped technology stocks into more conservative stocks and dividend paying stocks.  

Dividend payers and raisers aren’t flashy.  Instead, they are often mature, well-established companies with revenues that are less susceptible to economic swings.  And most important, they make money and reward investors with dividends.  

There are several good ETFs that concentrate on dividend payers.  Schwab Dividend Equity (SCHD) and ProShares S&P 500 Aristocrats (NOBL) are both up this year.  Yes, up.  Vanguard Dividend Growth (VIG) is a bit more aggressive and has a small year-to-date loss.

As for individual stocks, my favorite holdings include Williams Companies (WMB), Oneok (OKE), Merck (MRK), and Amgen (AMGN).  In addition to paying dividends, they often raise them as well.  Add in some preferreds for income and you’ll receive lots of dividends while waiting for the market to recover.  That is a winning strategy. 

David Vomund is an Incline Village-based Independent Investment Advisor.  Information is found at www.VomundInvestments.com or by calling 775-832-8555.  Clients hold the positions mentioned in this article.  Past performance does not guarantee future results.  Consult your financial advisor before purchasing any security.