Chris Dillow 

When to be a value investor

Chris Dillow

Chris Dillow
When to be a value investor

Many of you like stocks with high dividends. But many of these carry a big danger. Back in 2007-08 housebuilders and mortgage lenders such as Northern Rock and Bradford & Bingley were on great yields. But they subsequently collapsed, with investors in some cases being wiped out completely. That episode warns us that a high yield can be a sign of high risk – in particular the danger that a stock might do horribly badly in recession. Good returns on value stocks in normal times are often just a reward for taking on this cyclical risk.

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